Fiscal policy would involve changes in which of the following?
Answer options:
A.
Exchange rate
B.
Interest rate
C.
Money supply
D.
Tax revenue
How to approach this question
Identify the definition of fiscal policy. Recall that it relates to government spending and taxation. Evaluate the options to see which one fits this definition.
Full Answer
D.Tax revenue✓ Correct
The correct answer is D. Fiscal policy is the use of government spending and taxation to influence the economy. Tax revenue is a key component of fiscal policy.
Fiscal policy refers to the use of government spending and taxation to influence the country's economy. Therefore, a change in tax revenue is a direct component of fiscal policy. The other options are related to monetary policy (interest rate, money supply) or international markets (exchange rate).
Common mistakes
Students often confuse fiscal policy with monetary policy. Remember: Fiscal = Government spending/taxation. Monetary = Central bank interest rates/money supply.
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