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 is to manage the economy through government spending and taxation. When a government runs a budget deficit, it means it spends more money than it collects in taxes. Fiscal policy can help address this by either increasing taxes or reducing spending to balance the budget. For example, if a government is borrowing too much money, it might decide to cut back on public projects or raise taxes on higher earners to improve its financial situation. Ultimately, effective fiscal policy aims to stabilize the economy and ensure sustainable growth while managing deficits responsibly.
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; Controlling inflation is often confused with fiscal policy.
Key Concepts
fiscal policy
Topic
Government Budget Deficits
Difficulty
easy level question
Cognitive Level
understand
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