ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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R GDP goes up
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Unemployment goes down
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Inflation goes down
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None of the above
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Detailed explanation-1: -The higher the tax wedge the stronger the disincentives to work. These tax burdens discourage employers from hiring. They also reduce the incentives for the unemployed to look for a job, and for those in employment to work longer or harder.
Detailed explanation-2: -Phillips showed a negative correlation between the rate of unemployment and the rate of inflation – the years with high unemployment showed low inflation, and the years with low unemployment experienced high inflation.
Detailed explanation-3: -In layman’s words, increasing inflation leads to decreasing unemployment and vice versa. Following this theory in the 1960s, many governments adopted a ‘stop-go’ strategy.
Detailed explanation-4: -Pradhan Mantri Mudra Yojana (PMMY) is being implemented by the Government for facilitating self-employment. Under PMMY, collateral free loans upto Rs. 10 lakh, are extended to micro/small business enterprises and to individuals to enable them to setup or expand their business activities.