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Which of the following is a Fiscal Policy tool in India?
1. Goods and Services Tax
2. Repo rate
3. Corporate tax
4. Public infrastructure spending
Select the correct option using the code given below:
1. Goods and Services Tax
2. Repo rate
3. Corporate tax
4. Public infrastructure spending
Select the correct option using the code given below:
- a)1, 2 and 3 only
- b)1, 3 and 4 only
- c)2 and 4 only
- d)1, 2, 3 and 4
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
Which of the following is a Fiscal Policy tool in India?1. Goods and S...
Fiscal policy relates to government spending and taxation. Repo rate does come under fiscal measures. It is a monetary policy tool
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Which of the following is a Fiscal Policy tool in India?1. Goods and S...
Explanation:
Fiscal policy refers to the use of government spending and taxation to influence the economy. In India, there are several fiscal policy tools that are used to manage the economy. Among the options given, the correct ones are:
1. Goods and Services Tax (GST):
The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. It is a fiscal policy tool because it affects both government revenue and consumer spending. By adjusting the GST rates, the government can influence the prices of goods and services, which in turn affects consumption and investment.
3. Corporate tax:
Corporate tax refers to the tax levied on the profits of companies. By adjusting the corporate tax rate, the government can influence the profitability of businesses and their investment decisions. Lowering corporate taxes can incentivize companies to invest more, stimulate economic growth, and create job opportunities.
4. Public infrastructure spending:
Public infrastructure spending refers to government expenditure on infrastructure projects such as roads, bridges, railways, and airports. This form of spending is a fiscal policy tool because it directly impacts economic activity. Increased public infrastructure spending can stimulate aggregate demand, create jobs, and boost economic growth.
2. Repo rate:
The repo rate is not a fiscal policy tool but a monetary policy tool. It is the rate at which the central bank lends money to commercial banks. Changes in the repo rate influence interest rates in the economy, which in turn affects borrowing costs and investment decisions. The repo rate is set by the Reserve Bank of India (RBI) and is used to manage inflation and economic growth.
Therefore, the correct option is b) 1, 3, and 4 only.
Fiscal policy refers to the use of government spending and taxation to influence the economy. In India, there are several fiscal policy tools that are used to manage the economy. Among the options given, the correct ones are:
1. Goods and Services Tax (GST):
The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. It is a fiscal policy tool because it affects both government revenue and consumer spending. By adjusting the GST rates, the government can influence the prices of goods and services, which in turn affects consumption and investment.
3. Corporate tax:
Corporate tax refers to the tax levied on the profits of companies. By adjusting the corporate tax rate, the government can influence the profitability of businesses and their investment decisions. Lowering corporate taxes can incentivize companies to invest more, stimulate economic growth, and create job opportunities.
4. Public infrastructure spending:
Public infrastructure spending refers to government expenditure on infrastructure projects such as roads, bridges, railways, and airports. This form of spending is a fiscal policy tool because it directly impacts economic activity. Increased public infrastructure spending can stimulate aggregate demand, create jobs, and boost economic growth.
2. Repo rate:
The repo rate is not a fiscal policy tool but a monetary policy tool. It is the rate at which the central bank lends money to commercial banks. Changes in the repo rate influence interest rates in the economy, which in turn affects borrowing costs and investment decisions. The repo rate is set by the Reserve Bank of India (RBI) and is used to manage inflation and economic growth.
Therefore, the correct option is b) 1, 3, and 4 only.
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