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Which action is an example of the government pursuing a fiscal policy? The central bank increases the money supply. The Federal Reserve decreases the money supply. Congress increases income tax rates. The Federal Reserve engages in open-market operations.

Justin Parker

in Social studies

1 answer

1 answer

Theresa Perry on August 14, 2018

The third alternative is the correct (C). Fiscal Policy can be practiced in two ways: by increasing or decreasing public spending or the increase or decrease of taxes. Increase public spending and lower taxes are expansionary fiscal policies, that is to say, aimed at stimulating the economy. On the contrary, the reduction of public spending and increase taxes are the fiscal policy contractionary that seek to cool the economy. In this way, the increase of the Income Tax is a fiscal policy, contractionist, with the aim of discouraging the economy. The other alternatives represent instruments of Monetary Policy.

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