CFA Practice Question

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CFA Practice Question

Changes in fiscal policy refer to changes in ______.

I. government expenditures
II. tax policy
III. money supply
IV. Fed interest rates
V. borrowing money by issuing T-securities
A. I and II
B. I, II and V
C. III, IV and V
Explanation: Changes in fiscal policy refer to deliberate changes in government expenditures, tax policy, and government borrowing to affect the size of the budget deficit or surplus.

User Contributed Comments 7

User Comment
Cata neither borrowing or expenditure relate to fiscal policy, cause aren't DIRECT changes of taxes, excisses, tax credits, etc. which really do comprise fiscal policy
johnsk Cata: what you refer to is tax policy. Borrowing and spending are also part of fiscal policy!
danlan Fiscal policy meaning is wider than tax policy, it includes tax, gov spending, etc.
bhaynes The only options above that apply to the Fed are control of the money supply and interest rates. The Gov't controls the rest.

Answer V is tricky.....but it can be ruled out as a Fed activity since the Fed does not issue treasuries, the Treasury does. So this would fall under Gov't (fiscal) activities, not Fed activities.

******Remember the Fed only buys and sells treasury securities, it does not issue them.
poomie83 money supply and interest rates are monetary policy tools
akils @bhyanes - thanks
renataa Treasury securities were the tricky one...
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