Which of the following is an example of fiscal policy?

• A. Increasing government spending on infrastructure projects
• B. Lowering the central bank's interest rate
• C. Buying government bonds in the open market
• D. Changing the reserve requirement for commercial banks

Answer: (A)

Verified step by step guidance

1. Understand that fiscal policy involves government decisions on taxation and spending to influence the economy.
2. Identify that fiscal policy tools include changes in government spending and taxation levels.
3. Recognize that increasing government spending on infrastructure projects is a direct use of fiscal policy because it involves government expenditure.
4. Note that lowering the central bank's interest rate, buying government bonds, and changing reserve requirements are monetary policy tools, managed by the central bank, not fiscal policy.
5. Conclude that among the options, increasing government spending on infrastructure projects is the example of fiscal policy.