ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A tight, or restrictive fiscal policy includes raising taxes and cutting back on federal spending. A loose or expansionary fiscal policy is just the opposite and is used to encourage economic growth.

Detailed explanation-2: -Fiscal policy is considered as contractionary or tight when the revenue is higher as compared to spending i.e., the budget of the government is in surplus. Fiscal policy is considered as loose or expansionary when spending is higher as compared to revenue i.e., the budget of the government is in deficit.

Detailed explanation-3: -Fiscal policy is defined as the policy under which the government uses the instrument of taxation, public spending and public borrowing to achieve various objectives of economic policy. Simply put, it is the policy of government spending and taxation to achieve sustainable growth.

Detailed explanation-4: -There are three types of fiscal policy.They are neutral policy, expansionary policy, and contractionary policy.

Detailed explanation-5: -A contractionary policy is a tool used to reduce government spending or the rate of monetary expansion by a central bank to combat rising inflation. The main contractionary policies employed by the United States include raising interest rates, increasing bank reserve requirements, and selling government securities.