📚 Learning Guide
Economic Growth and Resource Allocation
easy

Which of the following best describes the role of fiscal policy in promoting economic growth?

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Choose the Best Answer

A

Increasing government spending to stimulate demand

B

Reducing taxes to decrease public debt

C

Implementing trade restrictions to boost local industry

D

Adjusting interest rates to control inflation

Understanding the Answer

Let's break down why this is correct

Answer

Fiscal policy refers to how the government uses its spending and taxation to influence the economy. When the government spends money on projects like building roads, schools, or healthcare, it creates jobs and helps businesses grow. This increased spending can lead to more people having money to spend, which boosts demand for goods and services. For example, if the government invests in renewable energy, it not only creates jobs in that sector but also encourages other businesses to invest in sustainable practices. Overall, effective fiscal policy helps create a healthier economy by ensuring resources are allocated where they are needed most.

Detailed Explanation

When the government spends more money, it creates jobs and helps businesses grow. Other options are incorrect because Some think that lowering taxes helps reduce debt; People might believe that trade restrictions help local businesses.

Key Concepts

Fiscal policy
Topic

Economic Growth and Resource Allocation

Difficulty

easy level question

Cognitive Level

understand

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