Question

Tax policy conducted for the purpose of achieving full​ employment, price​ stability, or economic growth is an example of

A. discretionary fiscal policy.

B. ​exchange-rate policy.

C. ​interest-rate policy.

D. monetary policy.

Answer 1

option A

Fiscal policy is a policy used by the government to stabilize the economy. It uses tax and government spending to expand or contract the economy. The tax policy change is used under the discretionary fiscal policy as the change is sudden and it is a part of fiscal policy. A market intervention to reduce recession or control inflation by the government is called discretionary fiscal policy.

Monetary policy is a policy used by the Fed to control the economy, and it uses money supply as a tool to stabilize the economy.

Interest rate is a part of monetary policy, and an exchange rate is a part of monetary and fiscal policy.