Bachelor of General Studies (BGS) Degree Practice Exam

What are measures intended to stimulate or support the economy through government spending and taxing called?

1. Monetary policies

2. Fiscal policies

3. Supply policies

4. Revenue policies

The correct answer is: Fiscal policies

The measures intended to stimulate or support the economy through government spending and taxing are referred to as fiscal policies. Fiscal policy is primarily concerned with how the government utilizes its budget to influence economic activity, particularly in times of recession or economic downturn. This can involve increasing government spending to create jobs and boost demand or adjusting tax rates to affect how much disposable income consumers and businesses have to spend. Monetary policies, in contrast, involve managing the money supply and interest rates, generally executed by a country’s central bank, rather than directly adjusting government spending and taxation. Supply policies focus on boosting the economy by increasing the production capacity and improving the supply side of the economy, while revenue policies pertain to how the government collects various forms of income, which is more about tax regimes and efficiency than stimulating the economy per se.