Which of the following would be considered a fiscal policy action?
A)A city changes its rates of land tax.
B)A federal government creates a subsidy for hybrid cars to encourage the purchase of fuel-efficient cars.
C)Foreign aid is given to Indonesia.
D)A tax cut is designed to stimulate spending during an economic contraction.

Question

Quizplus · Accepted Answer

A tax cut designed to stimulate spending during an economic contraction is a fiscal policy action. Fiscal policy involves the use of government spending, taxation, and borrowing to influence the economy. The creation of a subsidy for hybrid cars (option B) could also be considered a fiscal policy action if it involves government spending. Option A is an example of a local tax policy, and option C is an example of foreign aid, which is not typically considered fiscal policy.

Which of the Following Would Be Considered a Fiscal Policy