By using fiscal policy, i (e) varying ______ and/or _____ governments achieve goals for output and employment growth as well as price stability?
Correct answer: D. tax rates, government spending
- A. demand pull inflation tax elasticity
- B. interest rates, financial liberalization
- C. interest rates, tax rates
- D. tax rates, government spending
Explanation
Fiscal policy works through changes in government spending and tax rates. Increasing spending or reducing taxes can raise output and employment, while the opposite measures can restrain inflationary pressure.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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