Answer to Question #281987 in Finance for Aston

Question

An example of Fiscal policy may include

a.A rising Fed Funds rate

b.Increasing money supply

c.Constructing a new highway

d.Raising the Reserve Requirement

Answer 1

Ans:- As an example of Fiscal Policy may include Constructing a new highway.

Fiscal Policy:- Fiscal policy is formulated by the government which focuses on adjusting the tax rates and spending levels. For example, when the economy is stagnant It is a tool through which the government may cut taxes and increase spending which indirectly increases the money supply into the market and businesses that create jobs and it helps to revive the economy.

when the govt cuts the taxes and increases spending on public infrastructure like building schools, construction of dams, constructing of highways are an example of expansionary Fiscal Policy.

Therefore option (c) is the right answer.