The correct answer is: Increasing infrastructure spending.
Fiscal stimulus is a policy that uses government spending or tax cuts to increase aggregate demand and stimulate economic growth. It is often used during economic downturns to help boost the economy.
Increasing infrastructure spending is a common form of fiscal stimulus. Infrastructure spending refers to government investment in public projects such as roads, bridges, and airports. This type of spending can help to create jobs, boost economic growth, and improve the quality of life.
Cutting taxes is another common form of fiscal stimulus. Tax cuts can put more money in the hands of consumers and businesses, which can lead to increased spending and economic growth. However, tax cuts can also lead to higher deficits and debt, so they should be used with caution.
Reducing subsidies is a less common form of fiscal stimulus. Subsidies are payments that the government makes to businesses or individuals to encourage them to engage in certain activities. Reducing subsidies can free up resources that can be used for other purposes, such as infrastructure spending or tax cuts.
Increasing interest rates is not a form of fiscal stimulus. Interest rates are the prices that banks charge each other for loans. When the Federal Reserve increases interest rates, it makes it more expensive for businesses and consumers to borrow money. This can help to slow down the economy and reduce inflation.
In conclusion, increasing infrastructure spending is an example of fiscal stimulus. It is a common policy that is used to boost the economy during economic downturns.