Taxes and government expenditures are instrument of?

Taxes and government expenditures are instruments of fiscal policy. Fiscal policy refers to the government's use of taxation and government spending to influence the economy. Through fiscal policy, the government can adjust the level of aggregate demand in the economy, which in turn affects economic growth, employment, and inflation. For example, during a recession, the government may increase government spending and reduce taxes to stimulate demand and boost economic growth. Conversely, during a period of high inflation, the government may decrease spending and increase taxes to reduce demand and control inflation. Therefore, the correct option is that taxes and government expenditures are instruments of "fiscal policy".