What Are the Two Tools of Fiscal Policy That Governments

question 21

Multiple Choice

What are the two tools of fiscal policy that governments can use to affect the level of aggregate demand?

• A) government spending and taxation
• B) government spending and technology improvements
• C) taxation and controlling imports
• D) taxation and controlling exports

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Definitions:

Leisure Time

Time that an individual can spend at their own discretion, not occupied by work or domestic responsibilities.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with less costly alternatives.

Higher Wage

Refers to an increase in the amount of money that an employee receives for performing one hour or another standard unit of work.

Leisure Time

Free time that an individual can spend away from work, chores, and other compulsory activities, often used for relaxation or hobbies.