Complete the sentence: Fiscal policy involves changes to...

Question

Complete the sentence: Fiscal policy involves changes to...

BlackTom AI · Accepted Answer

To tackle the sentence completion, start by recalling what fiscal policy governs in macroeconomics. 
Option 1: 'interest rates' — changes in interest rates are typically a domain of monetary policy, managed by a central bank, not fiscal policy, so this option narrows the focus away from fiscal instruments.
Option 2: 'government spending and taxation' — these are the classic tools of fiscal policy, used to influence aggregate demand, employment, and overall economic activity by altering the level of government outlays and revenue collection.
Option 3: 'government spending and interest rates' — while government spending is a fiscal tool, 'interest rates' belong to monetary policy. Mixing these two creates an incorrect pairing for fiscal policy definitions since interest rates are not adjusted directly by fiscal authorities.
Option 4: 'taxation and interest rates' — taxation is a fiscal instrument, but 'interest rates' again pertain to monetary policy. The combination implies involvement of monetary levers, which is outside the scope of fiscal policy.
Consider the core purpose of fiscal policy: to influence the economy through policy decisions about how the government collects and spends money. This is why the combination that aligns with that purpose is the pairing of government spending and taxation, rather than any inclusion of interest rates, which are typically managed separately by monetary authorities.
In summary, the reasoning focuses on identifying which options align with the standard definitions of fiscal policy instruments, distinguishing them from monetary policy tools, and recognizing which components belong together conceptually.

BECO011 Week 9 Extra Practice Question

Complete the sentence: Fiscal policy involves changes to...

View Explanation

Log in for full answers

Similar Questions

In a consumer society, many adults channel creativity into buying things

Economic stress and unpredictable times have resulted in a booming industry for self-help products

People born without creativity never can develop it

A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

Which of the following statement regarding cost is correct:

Under the assumptions used in cost-volume-profit analysis, as the activity increases:

The CVP and break-even analysis are supported by a range of important assumptions. Which of the following is not an assumption of the CVP:

The break-even point is that at which:

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler