Dividing fiscal policy into two instruments has the effect of introducing another policy target:
A)the interest rate.
B)the national debt.
C)the unemployment rate.
D)the division of output between public and private spending.

Question

Quizplus · Accepted Answer

Dividing fiscal policy into two instruments, namely tax policy and spending policy, creates another policy target, which is the division of output between public and private spending. This is because tax policy affects private spending by changing the disposable income of households, while spending policy affects public spending on goods and services. Therefore, the division of output between public and private spending becomes a relevant policy target alongside other traditional targets such as the unemployment rate and the national debt.

Dividing Fiscal Policy into Two Instruments Has the Effect of Introducing