ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Cash rate and Reserve Requirements
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Open Market Operations and Tax
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Government spending and Reserve Requirements
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Tax and Government Spending
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Detailed explanation-1: -Ans. Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.
Detailed explanation-2: -There are two key tools of the fiscal policy: Taxation: Funds in the form of direct and indirect taxes, capital gains from investment, etc, help the government function. Taxes affect the consumer’s income and changes in consumption lead to changes in real gross domestic product (GDP).
Detailed explanation-3: -Government spending is a fiscal policy tool because it has the power to raise or lower real GDP. By adjusting government spending, the government can influence economic output.
Detailed explanation-4: -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.
Detailed explanation-5: -There are three types of fiscal policy.They are neutral policy, expansionary policy, and contractionary policy.