Question

Which of the following options is NOT an element of fiscal policy?

a
Business investment
b
Government spending
c
Taxes

Answer 1

Business investment

Step-by-step explanation:

Fiscal policy refers to the government's strategies on spending and taxation to influence economic conditions. By adjusting its spending and taxes, a government sways the aggregate demand in the country. The government applies fiscal policy in the following circumstances.

1. Stimulate economic recovery and growth in times of recession.
2. Keep the inflationary pressures under control to maintain the inflation rate at the desired level.
3. Ensure the steady growth of the economy. The government aims at avoiding a sudden boom and bust in the economy, which causes unstable market prices.