Question

All the following actions represent fiscal policy EXCEPT A. a decrease in government spending. B. an...

All the following actions represent fiscal policy EXCEPT

A.

a decrease in government spending.

B.

an increase in corporate income tax rates.

C.

a reduction in individual income tax rates.

D.

an increase in the money supply.

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Answer #1

A fiscal policy is any policy which is undertaken by the government. In this policy the government adjust its revenue/ expenditure to cause changes in the economy. The other kind is monetary policy undertaken by central banks and it deal with adjusting the economy's interest rate. Based on this briefing -

A. This is a fiscal policy as it is undertaken by the government and decreases its expenditure.

B. This is a fiscal policy because government isuue tax rules. Here increase in corporate tax, increases government revenue.

C. Also a fiscal policy. This reduces income tax rate and hence there is a decrease in the governments revenue.

D. This is the correct option. Money supply is decided and adjusted by the Central bank. This policy increases money supply and decreases interest rates. So this is a monetary policy. Option D is correct.

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