Which of the following is a tool of fiscal policy? (2023)

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Question: Which of the following is a tool of fiscal policy? (2023)

Options:

Correct Answer: Government spending

Exam Year: 2023

Solution:

Government spending is a primary tool of fiscal policy, used to influence economic activity through budgetary decisions.

Which of the following is a tool of fiscal policy? (2023)

Which of the following is a tool of fiscal policy? (2023)

Step 1: Understand what fiscal policy is. Fiscal policy refers to the government's use of spending and taxation to influence the economy.
Step 2: Identify the tools of fiscal policy. The main tools are government spending and taxation.
Step 3: Recognize that government spending is a primary tool. This means that when the government decides to spend money on projects, it can help boost the economy.
Step 4: Consider how government spending affects economic activity. When the government spends money, it can create jobs and increase demand for goods and services.

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