Certified Financial Planner (CFP) Practice Exam 2025 – All-in-One Study Guide for Exam Success!

The correct answer is based on the distinction between fiscal policy and other economic policies. Fiscal policy refers to the government's use of taxation and spending to influence the economy. This includes actions like increasing purchases of public goods, reducing taxes to stimulate spending, or increasing taxes to control inflation.

The option that does not qualify as fiscal policy is the claims made about the Federal Funds Rate. The Federal Funds Rate is a tool employed primarily by the Federal Reserve, which operates under monetary policy, not fiscal policy. Monetary policy involves managing the money supply and interest rates to influence economic conditions. While the Federal Funds Rate can impact financial conditions and subsequently affect economic activity, it is not a direct action taken by the government in terms of spending or taxation.

Understanding the distinction between monetary policy (related to interest rates and the money supply) and fiscal policy (related to government spending and taxation) is crucial for recognizing how different tools are employed to manage the economy.