Which of the following is an example of a policy lever that can influence macroeconomic performance?

• A. The level of consumer preferences
• B. Technological innovation
• C. Changes in government spending
• D. Natural resource endowments

Answer: (C)

Verified step by step guidance

1. Step 1: Understand what a policy lever is in macroeconomics. A policy lever refers to a tool or instrument that policymakers, such as the government or central bank, can actively adjust to influence the overall economy.
2. Step 2: Review each option to determine if it is something that policymakers can directly control or change through policy decisions.
3. Step 3: Analyze 'The level of consumer preferences' — this is determined by individual choices and tastes, which are not directly controlled by policy, so it is not a policy lever.
4. Step 4: Consider 'Technological innovation' — while important for economic growth, it generally evolves through private sector research and development and is not directly controlled by government policy in the short term.
5. Step 5: Evaluate 'Changes in government spending' — this is a classic example of a fiscal policy lever, where the government can increase or decrease spending to influence aggregate demand and overall economic performance.