Which of the following activities represent(s) the use of fiscal policy? Choose

Question

Which of the following activities represent(s) the use of fiscal policy? Choose one or more: A. The economy is expanding and the government increases the income tax rate B. The government restricts the purchase of cigarettes. C. The economy is in a recession and a privately funded advertising program encourages consumers to purchase more goods and services D. The economy is expanding and the Federal Reserve decides to take steps to decrease the money supply E. The economy is expanding, but because of concerns about pollution, the government passes tougher antipollution regulations. F. The economy is doing poorly and government cuts back on spending in an attempt to balance the budget.

Explanation / Answer

Uses of fiscal policy are: (A) and (F).

Fiscal policy is used by the government and the three fiscal policy tools are government spending on goods and services, taxes and transfer payments. Private initiatives are not included and any action taken by Central Bank belong to monetary policy.

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