Fiscal policy targets government revenue and spending

Steps:

• Recall that fiscal policy involves government adjustments to taxation and spending to influence the economy.
• Evaluate options: identify which directly alter taxes or government budgets.
• Eliminate non-fiscal measures like monetary or regulatory policies.
• Confirm the tax-related option as the fiscal example.

Why C is correct:

• Reducing corporation tax lowers government revenue from businesses, directly fitting the fiscal policy definition of using taxation to stimulate economic activity.

Why the others are wrong:

• A: Exchange rate changes are part of monetary or foreign exchange policy, not fiscal.
• B: Altering trade union power is labor or regulatory policy, unrelated to taxes or spending.
• D: Interest rate adjustments are monetary policy controlled by central banks, not government fiscal tools.

Final answer: C