Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following is not one of the elements of fiscal policy?

1. Expenditure

2. Borrowing

3. Employment levels

4. Revenues

The correct answer is: Employment levels

Fiscal policy involves government actions regarding its expenditures and revenues to influence the economy. The key elements of fiscal policy typically include government spending (expenditure), taxation (which influences revenues), and borrowing (to finance deficits). Employment levels, while critically influenced by fiscal policy, are not a direct component of fiscal policy itself. Rather, employment is an outcome that may be affected by fiscal measures such as changes in government spending or tax rates. Essentially, fiscal policy aims to manage the economy through controlled spending and taxation to achieve broader economic goals, including employment, but employment levels do not directly constitute a fiscal policy element. Understanding this distinction clarifies why employment levels are not categorized as a fundamental element of fiscal policy.