Identify which item below is an example of fiscal rule.
Caps on debt-to-GDP ratios for the government’s annual budget
A limit of 0.25 percentage point on increase in the interest by the central bank per quarter
An income tax rate of 15 percent
A commitment of foreign aid for budget assistance
Caps on debt-to-GDP ratios for the government’s annual budget
Explanation:
Given that fiscal rules are measures set out to the government to curtail excessive spending, thereby preventing the need to borrow in which future generations are left to pay for.
HeIce, in this case, the correct answer is that the perfect example of a fiscal rule is "Caps on debt-to-GDP ratios for the government’s annual budget"
This is because such caps will prevent excessive borrowing.
