ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increasing taxation
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Open market sales
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decreasing taxation
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Increasing government spending
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Detailed explanation-1: -Expansionary fiscal policy tools include increasing government spending, decreasing taxes, or increasing government transfers.
Detailed explanation-2: -Fiscal policy that increases aggregate demand directly through an increase in government spending is typically called expansionary or “loose.” By contrast, fiscal policy is often considered contractionary or “tight” if it reduces demand via lower spending.
Detailed explanation-3: -The tools of fiscal policy also aim to stabilise the economy during various inflationary pressures. In the short term, the governments may focus on macroeconomic stabilisation by cutting taxes and increasing spending to boost a weak economy or increase taxes and reduce spending during inflation.
Detailed explanation-4: -Tax cut is an example of expansionary fiscal policy.