Fiscal policy is the government’s approach to how it budgets money. how it invests money. taxing and borrowing. taxing and spending.

The correct answer is: "taxing and spending"

Fiscal policy is the tool used by national goverments to influence the economic situation by varying the level of public spending and of taxation (the main source of public income). It policy is based on Keynesian economic theories, which support increasing goverment spending levels in recession times in order to boost aggregate demand figures and, in turn, economic growth. The income needed to undertake such increase would be mostly raised using taxes.

Fiscal policy is the government’s approach to taxing and spending.

Explanation:

Fiscal policy is the government’s approach to taxing and spending in order to influence and balance the economy for the mid or long term so that the inflation and wages levels remain stable, the employment rate be high, and the overall economy grow.

There are mainly two types of fiscal policies that governments use depending on the economic state that a nation is in: Expansionary Fiscal Policy and Contractionary Fiscal Policy. The former is used when a nation has a high unemployment rate and there is not enough demand, so the government aims at stimulating economic growth by cutting taxes and increasing government spending. The Contractionary Fiscal Policy, on the other hand, is employed when a nation has inflation and the government tries to counteract this inflation by raising taxes and decreasing government expanding, that is to say.

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