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Answer :
Final answer:
b. taxes; government expenditures
Fiscal policy is the use of government spending and taxation to achieve macroeconomic goals, contrasting with monetary policy, which deals with the money supply and interest rates. The correct answer to the student's question is 'b. taxes; government expenditures.'
Explanation:
Fiscal policy refers to the use of government spending and taxation to influence the economy. When changes are made to these two elements, it is done to accomplish macroeconomic goals such as achieving economic growth, price stability, and full employment.
The correct answer to the question is 'b. taxes; government expenditures.' This is because fiscal policy involves the government altering its levels of taxation and spending in order to influence aggregate demand and aggregate supply within the economy.
Unlike monetary policy, which is concerned with managing the money supply and interest rates, fiscal policy focuses on government revenues and expenditures as a means to stabilize and steer the economy.
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