Fiscal policy is enacted through changes in: 
a. interest rates
b. the supply of money
c. unemployment and inflation
d. taxation and government spending

D

Explanation:

The fiscal policy affects aggregate demand through changes in government spending and taxation. The two factors influence employment and household income, which then impact consumer spending and investment.

On the other hand we have monetary policy that impacts the money supply in an economy, which influences interest rates and the inflation rate. Those factors influence the business expansion, net exports, employment, the cost of debt and the relative cost of consumption which directly or indirectly impact aggregate demand.

Option (D) is correct.

Explanation:

Correct option: Taxation and government spending.

Fiscal policy refers to the policy that is used by the government through changes in taxes and government spending, these changes in taxes and government spending affect the demand for the goods and services and hence, affect the inflation, employment, output and economic growth.

If there is an increase in government spending and reduction in taxes then as a result aggregate demand for the goods increases. This is known as Expansionary fiscal policy.

Similarly, if there is an decrease in government spending and increase in taxes then as a result aggregate demand for the goods decreases. This is known as Contractionary fiscal policy.

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