ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Policy tools for stimulating the economy include interest rate cuts, government spending increases, and quantitative easing. Policymakers generally direct stimulus programs toward key economic sectors to take advantage of multiplier effects that they hope will indirectly increase private sector spending.

Detailed explanation-2: -Imposition of taxes results in the reduction of disposable income of the taxpayers. This will reduce their expenditure on necessaries which are required to be consumed for the sake of improving efficiency. As efficiency suffers ability to work declines. This ultimately adversely affects savings and investment.

Detailed explanation-3: -Broadly speaking, there are two main sources of economic growth: growth in the size of the workforce and growth in the productivity (output per hour worked) of that workforce. Either can increase the overall size of the economy but only strong productivity growth can increase per capita GDP and income.

Detailed explanation-4: -Total tax quota increased by 1% decreases the GDP growth rate by 0.29% in the same year. Estimations confirm a statistically significant negative effect of direct taxes on GDP growth as well. A cut in the direct tax quota by 1% raises the GDP growth rate by 0.43%.