ECONOMICS (CBSE/UGC NET)

ECONOMICS

FISCAL POLICY

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Policies involving increased government spending and reduced taxes to increase the level of aggregate demand.
A
Fiscal Policies
B
Monetary Policies
C
Expansionary Policy
D
Contractionary Policy
Explanation: 

Detailed explanation-1: -Expansionary fiscal policy increases the level of aggregate demand, either through increases in government spending or through reductions in taxes. Expansionary fiscal policy is most appropriate when an economy is in recession and producing below its potential GDP.

Detailed explanation-2: -Fiscal policy that increases aggregate demand directly through an increase in government spending is typically called expansionary or “loose.”

Detailed explanation-3: -First, if the government increases its purchases but keeps taxes constant, it increases demand directly. Second, if the government cuts taxes or increases transfer payments, households’ disposable income rises, and they will spend more on consumption. This rise in consumption will in turn raise aggregate demand.

Detailed explanation-4: -Expansionary policy is intended to boost business investment and consumer spending by injecting money into the economy either through direct government deficit spending or increased lending to businesses and consumers.

Detailed explanation-5: -Answer and Explanation: An expansionary monetary policy would most likely increase aggregate demand. An expansionary policy is one that increases money supply. This increases the supply of loanable funds in the market, and reduces interest rate.

There is 1 question to complete.