Fiscal policy refers to the:
A)manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.
B)manipulation of government spending and taxes to achieve greater equality in the distribution of income.
C)altering of the interest rate to change aggregate demand.
D)fact that equal increases in government spending and taxation will be contractionary.

Question

Quizplus · Accepted Answer

Fiscal policy involves the use of government spending and taxation to influence the level of economic activity in a country. The goal of fiscal policy is to stabilize domestic output, employment, and the price level. Option B refers to redistributive fiscal policy and Option C refers to monetary policy, not fiscal policy. Option D is incorrect as it assumes that equal increases in government spending and taxation have the same effect, which is not always the case.

Fiscal Policy Refers to The