The primary tools of fiscal policy are:
A) money supply and money demand.
B) government expenditure and money supply.
C) government expenditure and taxation.
D) taxation and interest rates.

Question

Quizplus · Accepted Answer

The primary tools of fiscal policy are government expenditure and taxation. The government can increase government expenditure to stimulate aggregate demand and economic growth. It can also decrease taxation to increase disposable income and boost consumption. On the other hand, it can reduce government expenditure and increase taxation to reduce inflationary pressures in the economy. Money supply and interest rates are tools of monetary policy.

The Primary Tools of Fiscal Policy Are