A recession has hit. As a result, the government has decided to reduce defense spending so that it can evenly spread out this money to its citizens in a one time payment. Is this an example of fiscal policy or monetary policy? Explain.

Question

A. This is an example of fiscal policy because the government is giving its citizens money without changing taxes in any way
B.This is an example of monetary policy because the government is adjusting its spending and not printing new money.
C.This is an example of fiscal policy because the government is adjusting its spending and not printing new money
D.This is an example of monetary policy because the government is giving its citizens money without changing taxes in any way.

Answer 1

A. This is an example of fiscal policy because the government is giving its citizens money without changing taxes in any way. Fiscal policy involves the government's decisions on spending and taxation to influence the economy, and in this scenario, the government is directly adjusting its spending by reducing defense spending and distributing the saved money to citizens. Monetary policy, on the other hand, involves decisions made by central banks regarding interest rates, money supply, and credit availability.