Which term describes a government policy for dealing with the budget, especially through taxation and borrowing?

Which term describes a government policy for dealing with the budget, especially through taxation and borrowing?

• A. Fiscal Policy
• B. Balance of Payments
• C. Tariff
• D. Standards

Answer: (A)

This is about how a government uses its budget to influence the economy through taxes and borrowing. That approach is fiscal policy—using tax changes and borrowing (and spending) to affect overall demand, growth, and employment. The other terms don’t fit: the balance of payments deals with international transactions; a tariff is a tax on imports; standards are rules or requirements. So the best description for a government policy dealing with the budget through taxation and borrowing is fiscal policy.

This is about how a government uses its budget to influence the economy through taxes and borrowing. That approach is fiscal policy—using tax changes and borrowing (and spending) to affect overall demand, growth, and employment. The other terms don’t fit: the balance of payments deals with international transactions; a tariff is a tax on imports; standards are rules or requirements. So the best description for a government policy dealing with the budget through taxation and borrowing is fiscal policy.