Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
To regulate interest rates
B
To manage taxation and government spending
C
To control inflation
D
To stabilize foreign exchange rates
Understanding the Answer
Let's break down why this is correct
Answer
The main purpose of fiscal policy in relation to government budget deficits is to manage the economy by adjusting government spending and taxation. When a government spends more money than it earns, it creates a budget deficit, which can lead to more borrowing and debt. Fiscal policy aims to address these deficits by either increasing taxes to raise more revenue or reducing spending to balance the budget. For example, if a government notices a rising deficit, it might decide to cut funding for certain programs or raise taxes on higher incomes to help bring the budget back into balance. Ultimately, effective fiscal policy helps ensure the economy remains stable and can support growth without excessive debt.
Detailed Explanation
Fiscal policy helps the government decide how much money to collect and spend. Other options are incorrect because Some might think fiscal policy is about interest rates; People may confuse fiscal policy with controlling inflation.
Key Concepts
fiscal policy
Topic
Government Budget Deficits
Difficulty
easy level question
Cognitive Level
understand
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