How is fiscal federalism best defined?

Multiple choice question for Monetary Union. Select an option, then review the explanation below.

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A financial arrangement among multiple nations where fiscal policies are established through a mutual treaty.A system among countries that imposes strict limits on government budget deficits.A fiscal framework across several countries featuring a unified budget along with tax and fiscal transfer mechanisms between them.A fiscal system where local and national leaders collaboratively decide on fiscal policies.

Explanation

Fiscal federalism refers to a system involving multiple countries that share a common fiscal budget and implement a coordinated system of taxation and fiscal transfers among themselves. This distinguishes it from systems where fiscal policies are set by treaties, deficit limits, or joint local-national decision-making.

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How is fiscal federalism best defined?

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