ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Monetary policy involves the Federal Reserve raising interest rates and restraining the supply of money and credit in order to rein in inflation. The two major fiscal policy tools that the U.S. government uses to influence the nation’s economic activity are tax rates and government spending.

Detailed explanation-2: -Policy tools The two main tools of fiscal policy are taxes and spending. Taxes influence the economy by determining how much money the government has to spend in certain areas and how much money individuals should spend.

Detailed explanation-3: -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-4: -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-5: -There are three types of fiscal policy. They are neutral policy, expansionary policy, and contractionary policy.