The use of tax and expenditure policy to regulate the economy is known as

Step 1: Analyze the question The question asks for the name given to the use of taxation and government expenditure to regulate (manage) the economy.

Step 2: Explain the concept Governments have two main tools for steering the economy:

• Fiscal policy: the use of government revenue (mainly taxes) and government spending to influence economic activity. It is usually handled by the Ministry of Finance and the National Assembly through the national budget.
• Monetary policy: the control of the money supply, interest rates and credit by the central bank. In Nigeria, this is the job of the Central Bank of Nigeria (CBN).

Step 3: Go through the options

• A. Monetary policy: This involves money supply and interest rates, not taxes and government spending. ❌
• B. Physical measures: This is not a standard economic policy term. It looks like a distractor, possibly a misprint of "physical controls" (direct controls like quotas and licensing). ❌
• C. Deregulation: This means removing government controls and restrictions from an industry or sector. It is the opposite of regulating. ❌
• D. Fiscal policy: This is the use of taxation and government expenditure to regulate the economy. ✅

Step 4: Answer The correct option is D. fiscal policy.

Example in Nigeria: When the government reduces import duties or company taxes to encourage business, or increases spending on roads and power to create jobs, that is fiscal policy at work.

💡 Exam tip: Link the words to the policy:

• Fiscal = Finance ministry = Taxes and Spending
• Monetary = Money supply = CBN (central bank)

If you see "tax" or "government spending/expenditure" in a question, think fiscal. If you see "interest rate," "money supply" or "central bank," think monetary.