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Fiscal Policy Video Lecture | Indian Economy for UPSC CSE
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FAQs on Fiscal Policy Video Lecture - Indian Economy for UPSC CSE
| 1. What is fiscal policy and how does it impact the economy? |  |
Ans. Fiscal policy refers to the government's use of taxation and spending to influence the economy. It involves using government spending and taxation to achieve economic objectives such as stabilizing the economy, promoting economic growth, and controlling inflation. By adjusting tax rates and government spending levels, fiscal policy can impact aggregate demand, employment rates, and overall economic activity.
| 2. How does expansionary fiscal policy work? | |
Ans. Expansionary fiscal policy is used to stimulate economic growth during periods of low economic activity. It involves increasing government spending and/or reducing taxes to boost aggregate demand. When the government increases spending, it injects money into the economy, creating jobs and encouraging consumer spending. Similarly, tax cuts put more money in consumers' pockets, leading to increased spending and economic growth.
| 3. What is the difference between fiscal policy and monetary policy? | |
Ans. Fiscal policy and monetary policy are both tools used by governments to influence the economy, but they operate in different ways. Fiscal policy involves changes in government spending and taxation, while monetary policy involves changes in interest rates and the money supply. Fiscal policy is controlled by the government, while monetary policy is controlled by the central bank. Fiscal policy primarily focuses on influencing aggregate demand, while monetary policy aims to control inflation and maintain price stability.
| 4. Can fiscal policy be used to control inflation? | |
Ans. Yes, fiscal policy can be used to control inflation. When the economy is experiencing high inflation, the government can implement contractionary fiscal policy. This involves reducing government spending and/or increasing taxes to reduce aggregate demand. By reducing spending and increasing taxes, the government aims to decrease consumer purchasing power and slow down economic activity, ultimately reducing inflationary pressures.
| 5. How does fiscal policy affect unemployment? | |
Ans. Fiscal policy can impact unemployment by influencing aggregate demand in the economy. Expansionary fiscal policy, which involves increasing government spending or reducing taxes, can stimulate economic activity and create jobs. By increasing government spending on infrastructure projects or providing tax incentives to businesses, fiscal policy can boost employment levels. Conversely, contractionary fiscal policy, which involves reducing government spending or increasing taxes, can lead to lower aggregate demand, potentially resulting in job losses and higher unemployment rates.
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Dec 21, 2024 Last updated |
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