ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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1 only
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2 only
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2 and 3
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1 and 2
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Detailed explanation-1: -A healthy fiscal policy is important to control inflation, increase employment and maintain the value of money. It has a very important role in managing the economy. Taxation-regulating which the government increases or decreases the disposable cash in the hands of the public.
Detailed explanation-2: -When government conducts an expansionary fiscal policy (i.e. increases in government spending or decreases in tax rate) it may run afoul of the crowding out effect. Expansionary fiscal policy means an increase in the budget deficit. The government is spending more money than it has in income.
Detailed explanation-3: -Key Takeaways This can reduce private sector income and loan demand, thus decreasing spending and borrowing. There are three main crowding out effects: economic, social welfare, and infrastructure. Crowding in suggests that government borrowing and spending can increase demand.
Detailed explanation-4: -A balanced budget is a budget (i.e., a financial plan) in which revenues are equal to expenditures, such that there is no budget deficit or surplus.