Fiscal policy does not have an effect on interest rates.

Question

Quizplus · Accepted Answer

Fiscal policy can have an effect on interest rates. For example, an expansionary fiscal policy (such as increasing government spending or decreasing taxes) may lead to higher demand for credit, which can push up interest rates. Conversely, a contractionary fiscal policy (such as reducing government spending or increasing taxes) may reduce demand for credit and lead to lower interest rates.

Fiscal Policy Does Not Have an Effect on Interest Rates