Fiscal policy is
A)the use of the federal budget to achieve macroeconomic objectives.
B)any policy by the Bank of Canada.
C)budgeting policy by aggregate households.
D)any attempt by the federal government or Bank of Canada to control inflation.
E)effective only when the federal government has a budget surplus.

Question

Quizplus · Accepted Answer

Fiscal policy refers to the use of government spending, taxation, and borrowing to influence the economy. It is focused on achieving macroeconomic objectives such as full employment, price stability, and economic growth. Therefore, option A is the correct choice as it defines fiscal policy accurately. Option B is incorrect because it refers to monetary policy, which is the responsibility of the Bank of Canada. Option C is incorrect because budgeting policy is a decision taken by households on a micro-level, and not by the government. Option D is incorrect because although one of the objectives of fiscal policy is to control inflation, it is not the only objective. Option E is incorrect because fiscal policy can be effective even when the government has a budget deficit, depending on its objectives and the state of the economy.

Fiscal Policy Is