Which of the Following is the Correct Fiscal Policy Definition?

Which of the Following is the Correct Fiscal Policy Definition?

A) Regulating the money supply and interest rates.
B) Government spending and taxation decisions.
C) Setting exchange rates.
D) Controlling inflation through monetary tools.

Correct Answer: B) Government spending and taxation decisions.

Explanation: Fiscal policy is a principal economic instrument employed by governments to control national economic performance through changes in the level of expenditure and taxation. Increasing the government's expenditure or cutting taxation will seek to boost spending and economic expansion, a course typically adopted over a period of recession. Reducing government spending or increasing taxation will serve to slow down a hot economy and contain inflation. Fiscal policy plays a significant role in determining employment levels, consumers' attitudes, and investment behaviour.

In the UK, fiscal policy is decided upon by the Treasury and executed through yearly budgets and other financial reports. To take a concrete example, when the economy is slack during times such as the 2008 financial meltdown or the COVID-19 pandemic, the UK government enhanced public expenditure and provided tax relief programs to the people and companies. How fast the fiscal policy gets executed and the responsiveness of the economy towards the same are largely responsible for the efficacy of the fiscal policy. It is also complemented by monetary policy, handled by the Bank of England and aimed at interest rates and money supply.

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1. Which of the Following is the Correct Oligopoly Definition?
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