ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The two major examples of expansionary fiscal policy are tax cuts and increased government spending.

Detailed explanation-2: -Fiscal policy tools are used by governments to influence the economy. These primarily include changes to levels of taxation and government spending. To stimulate growth, taxes are lowered and spending is increased. This often involves borrowing by issuing government debt.

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: -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.

Detailed explanation-5: -Expansionary fiscal policy includes tax cuts, transfer payments, rebates and increased government spending on projects such as infrastructure improvements. For example, it can increase discretionary government spending, infusing the economy with more money through government contracts.