ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -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.

Detailed explanation-3: -Fiscal policy is the expenditure and revenue (tax) policy of the government to accomplish the desired objectives. In case of excess demand (i.e., when current demand is more than AS at full employment), objective of fiscal policy is to reduce aggregate demand.

Detailed explanation-4: -Expansionary fiscal policy tools include increasing government spending, decreasing taxes, or increasing government transfers. Doing any of these things will increase aggregate demand, leading to a higher output, higher employment, and a higher price level.

Detailed explanation-5: -The two major examples of expansionary fiscal policy are tax cuts and increased government spending. Both of these policies are intended to increase aggregate demand while contributing to deficits or drawing down budget surpluses.