Monetary policy is linked to fiscal policy when government spending is financed by:.a) taxes. b) borrowing from banks. c) borrowing from foreigners. d) printing money.

d) printing money.

Explanation:

Fiscal policy in economics refers to the use of government expenditures (spending) and revenues (taxation) in order to influence macroeconomic conditions such as Aggregate Demand (AD), inflation, and employment within a country. Fiscal policy is in relation to the Keynesian macroeconomic theory by John Maynard Keynes.

For instance, measuring the time between when a fiscal policy is implemented and when the people feel its impact in the society refers to a lag.

A fiscal policy affects combined demand through changes in government policies, spending and taxation which eventually impacts employment and standard of living plus consumer spending and investment. Monetary policy affects the money supply in an economy, which then creates an impact on interest rates and the inflation rate.

Additionally, a stimulative fiscal policy when combined by the government with a restrictive monetary policy will result in an increase in the interest rates.

Hence, a monetary policy is linked to fiscal policy when government spending is financed by printing money because the printing of money would significantly increase the circulation of money or money supply and most likely result in inflation.

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