Question

When the Federal government uses taxation and spending actions to stimulate the economy it is conducting:

A. Fiscal policy
B. Incomes policy
C. Monetary policy
D. Employment policy

Answer 1

Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time. When the Federal government uses taxation and spending actions to stimulate the economy, it is conducting fiscal policy.

Step-by-step explanation:

Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time. When the Federal government uses taxation and spending actions to stimulate the economy, it is conducting fiscal policy. For example, if there is a recession and unemployment increases, the government can implement an expansionary fiscal policy by lowering taxes or increasing government spending. Both of these actions stimulate output and decrease unemployment.