Which of the following is a tool of fiscal policy?

Fiscal policy refers to the government's use of taxation and spending to influence the economy. Raising taxes is a tool of fiscal policy because it directly affects government revenue and can influence overall economic activity. When the government raises taxes, it can reduce disposable income for individuals and businesses, which can, in turn, impact consumption and investment decisions. This action is often used to manage demand within the economy, control inflation, or address budget deficits.

The other options mentioned pertain to monetary policy, which is the management of money supply and interest rates by a central bank. Adjusting interest rates, increasing the money supply, and setting reserve requirements are not fiscal measures but rather tools used by central banks to influence the economy’s liquidity and overall monetary conditions. Each of these monetary policy tools aims to affect economic variables such as inflation, employment, and growth, but they do not involve direct government actions related to taxes or spending.