An example of fiscal policy is
A)a reduction in government spending.
B)a reduction in investment spending by the private sector.
C)an increase in autonomous spending by consumers.
D)an increase in Social Security spending by the elderly.

Question

Quizplus · Accepted Answer

Fiscal policy involves government actions aimed at influencing economic conditions by changing its spending or taxation policies. A reduction in government spending can be an example of contractionary fiscal policy, which aims to slow down inflation by reducing aggregate demand. So, option A is the correct answer.

Option B is incorrect because a reduction in investment spending by the private sector is not related to government policies. It might happen due to changes in market conditions, business cycle, etc.

Option C is incorrect because autonomous spending by consumers is dependent on individual choices and not directly influenced by government policies.

Option D is incorrect because an increase in Social Security spending by the elderly can be an example of expansionary fiscal policy, but it does not align with the given question as they asked for an example of fiscal policy, not specifically expansionary or contractionary.

An Example of Fiscal Policy Is