Which of the following would be considered an active fiscal policy?
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 passed during a recession.

Question

Quizplus · Accepted Answer

A tax cut designed to stimulate spending during a recession is an example of active fiscal policy. This is because it involves the government changing its tax policy to directly influence the economy and encourage economic growth. The other options listed involve actions taken by the Federal Reserve or increases in government spending, which are not considered active fiscal policy.

Which of the Following Would Be Considered an Active Fiscal