Question : The fiscal policy refers to changes in:
Option 1: Government expenditure and taxation
Option 2: Interest rates and money supply
Option 3: Exchange rates and trade policies
Option 4: Labor market regulations
Correct Answer:
Government expenditure and taxation
Solution : The correct answer is (a) Government expenditure and taxation.
Fiscal policy involves the use of government spending and taxation to influence the overall state of the economy. It is one of the main tools that governments have to manage the economy and achieve specific economic objectives.
Changes in government expenditure refer to adjustments made to the amount of money that the government spends on various goods, services, infrastructure projects, and programs. Increasing government expenditure can stimulate economic activity and aggregate demand, while reducing government expenditure can have the opposite effect.
