ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -A change in fiscal policy has a multiplier effect on economic growth or contraction because an increase or decrease in government spending or a change in tax policy ripples through every major segment of the economy, affecting levels of spending, production, and business investment.

Detailed explanation-3: -Fiscal policy is a means to use government spending and taxation to influence the economic situation. It is different from the monetary policy that is under the control of the central bank in that country. Together these two policies can help a country to achieve its economic goals.

Detailed explanation-4: -There are three components of the Fiscal Policy of India: Government Receipts. Government Expenditure. Public Debt.

Detailed explanation-5: -Contractionary fiscal policy, on the other hand, is a measure to increase tax rates and decrease government spending. It occurs when government deficit spending is lower than usual.