ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -There are three types of fiscal policy. They are neutral policy, expansionary policy, and contractionary policy.

Detailed explanation-2: -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.

Detailed explanation-3: -Maintaining interest rates at low levels is another way that governments seek to stimulate the economy, generate tax revenue, and, ultimately, reduce the national debt. Lower interest rates make it easier for individuals and businesses to borrow money.

Detailed explanation-4: -The government possesses two major fiscal tools for influencing the economy. These tools can be divided into spending tools and revenue tools. Spending tools refer to the overall government spending. On the other hand, revenue tools refer to taxes collected by the government.