ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The tools used to promote beneficial economic activity are adjustments to tax rates and government spending. When economic activity slows or deteriorates, the government may try to improve it by reducing taxes or increasing its spending on various government programs.

Detailed explanation-2: -Supply-side economics aims to bolster an economy by implementing policies that will lead to an increased supply of goods and services and subsequent economic growth such as: Reducing corporate income tax rates to provide companies with more cash for reinvestment.

Detailed explanation-3: -It is essential that in order to increase the tax to GDP ratio India’s informal sector is brought into the formal fold and there should be progressive income taxes, complemented by indirect taxation, property taxes, and capital taxes, etc. Thus focus should be on widening the tax base rather than simply deepening it.

Detailed explanation-4: -Summary. Expansionary fiscal policy increases the level of aggregate demand, either through increases in government spending or through reductions in taxes. Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP.

Detailed explanation-5: -There are three types of fiscal policy. They are neutral policy, expansionary policy, and contractionary policy.