Multiple Choice
With expansionary fiscal policy, what is the primary goal for aggregate demand?
70
views
19. Fiscal Policy
Introduction to Fiscal Policy
Multiple Choice
In macroeconomics, fiscal policy most closely focuses on which government actions to influence aggregate demand and economic activity?
A
Changes in trade tariffs and import quotas to reduce the trade deficit
B
Changes in government spending and taxation
C
Changes in wage controls and price ceilings to reduce inflation directly
D
Changes in the money supply and policy interest rates by the central bank
Verified step by step guidance1
Step 1: Understand the definition of fiscal policy. Fiscal policy refers to the use of government spending and taxation decisions to influence the overall economy, particularly aggregate demand and economic activity.
Step 2: Identify the tools of fiscal policy. These primarily include changes in government spending (such as infrastructure projects, social programs) and changes in taxation (such as tax cuts or increases).
Step 3: Recognize that other options like changes in trade tariffs and import quotas relate to trade policy, not fiscal policy.
Step 4: Note that wage controls and price ceilings are forms of direct regulation, not fiscal policy tools.
Step 5: Understand that changes in the money supply and policy interest rates are monetary policy tools, managed by the central bank, not fiscal policy.
Related Videos
Related Practice
