Question

Fiscal policy refers to

a. efforts to balance a government's budget.
b. changes in the money supply to achieve particular economic goals.
c. changes in government expenditures and taxation to achieve particular economic goals.
d. the change in private expenditures that occurs as a consequence of changes in government spending.

Answer 1

The correct answer is option c.

Step-by-step explanation:

Fiscal policy can be defined as a policy tool with the government that is used to achieve certain economic goals, using the tools of government spending and taxation.

In case of a recessionary gap, expansionary fiscal policy is adopted by reducing taxes and increasing government spending.

While, in case of an inflationary gap, contractionary fiscal policy is adopted through increasing taxes and reducing government taxes.