(Answered) Which of the following is a fiscal policy tool?Changes in the interest rateChanges in tax…

➤ When do governments use transfer payments and spending as fiscal tools?
Governments boost transfer payments and public spending during recessions to support incomes, maintain demand, and stabilize employment. Transfer payments act as automatic stabilizers, while discretionary spending—like infrastructure projects—delivers targeted stimulus. In expansions, policymakers may curb spending or raise taxes to control inflation and rebuild fiscal buffers.