Question

Changes in taxes and spending by the executive and legislative branches of a country's government that...

Changes in taxes and spending by the executive and legislative branches of a country's government that can be used to either stimulate or restrain the economy are called:

Select one:

a. monetary policy.

b. fiscal policy.

c. foreign policy.

d. exchange rate policy.

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Answer #1

Option b

b. fiscal policy.

Fiscal policy is used taxes and government spending to stimulate or restrain the economy.

Expansionary fiscal policy is used to stimulate the economy by increasing government spending and decreases taxes.

Contractionary fiscal policy is used to restrain the economy by decreasing government spending and increasing taxes.

Expansionary policy is used when the economy is in recession

Contractionary fiscal policy is used when an economy in an inflationary gap.

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