When the government intentionally uses taxes and government spending as a means to influence the level of output, employment, and general prices in the economy, it is engaging in fiscal policy.

Question

Quizplus · Accepted Answer

This statement accurately describes fiscal policy, which involves the use of government spending and taxation to influence economic outcomes. By increasing government spending or decreasing taxes, for example, the government can stimulate demand and encourage economic growth. Conversely, by decreasing government spending or increasing taxes, the government can slow down demand and control inflation.

When the Government Intentionally Uses Taxes and Government Spending as a Means