The increase of tax to pay for government spending is the correct answer.
Basically, Fiscal policy refers to policy which involves government using its spending and tax policies to influence the country economic conditions.
A very good example of fiscal policy is when there is changes in government spending and tax policies to influence economic situation.
In this question, the increase of tax to pay for greater military spending is a very good example of fiscal policy in the economy.
Therefore, in conclusion, the correct answer is Option C.
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