Fiscal policy attempts to affect the level of overall spending by making changes in:
A) the interest rate.
B) the money supply.
C) banking regulations.
D) taxes and spending.

Question

Quizplus · Accepted Answer

Fiscal policy involves changes in government spending and taxation in order to influence the level of aggregate demand in the economy. Therefore, the best choice is D, as taxes and spending are the tools used to affect overall spending. The other choices, interest rate, money supply, and banking regulations, are tools of monetary policy used by central banks to control inflation and stabilize the economy.

Fiscal Policy Attempts to Affect the Level of Overall Spending