What are the two tools of fiscal policy that governments can use to stabilize an economy?
A) government spending and technology improvements
B) government spending and taxation
C) taxation and controlling imports
D) taxation and controlling exports

Question

Quizplus · Accepted Answer

The two tools of fiscal policy are government spending and taxation. By adjusting government spending and taxation levels, governments can either increase or decrease demand in the economy, which can help to stabilize it during periods of recession or inflation. For example, during a recession, governments may increase spending levels and reduce taxation to boost demand and stimulate economic growth. Conversely, during periods of high inflation, governments may decrease spending and increase taxation to reduce demand and control prices.

What Are the Two Tools of Fiscal Policy That Governments