Which of the following would be considered a fiscal policy action?
A)The Fed increases the money supply.
B)Tax incentives are offered to encourage the purchase of fuel efficient cars.
C)Spending on the war in Afghanistan is increased to promote homeland security.
D)A tax cut is designed to stimulate spending during a recession.

Question

Quizplus · Accepted Answer

A tax cut designed to stimulate spending during a recession is a fiscal policy action. Fiscal policy involves changes in government spending and taxation in order to influence economic conditions. The other options are monetary policy actions, which involve changes in the money supply and interest rates by the Federal Reserve.

Which of the Following Would Be Considered a Fiscal Policy