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Fiscal Policy Video Lecture | Additional Study Material for UPSC
FAQs on Fiscal Policy Video Lecture - Additional Study Material for UPSC
| 1. What is fiscal policy? |  |
Ans. Fiscal policy refers to the government's use of taxation and spending to influence the economy. It involves decisions on how the government collects revenue through taxes and how it allocates those funds for public expenditure. The aim of fiscal policy is to stabilize the economy, promote economic growth, and maintain price stability.
| 2. How does fiscal policy impact the economy? | |
Ans. Fiscal policy has a significant impact on the economy. When the government increases spending or reduces taxes, it injects more money into the economy, which can stimulate economic activity and boost aggregate demand. Conversely, when the government decreases spending or increases taxes, it reduces the amount of money available for households and businesses, which can dampen economic growth.
| 3. What are the main tools of fiscal policy? | |
Ans. The main tools of fiscal policy are government spending and taxation. By adjusting government spending, policymakers can influence the level of aggregate demand in the economy. They can increase spending on infrastructure projects, education, healthcare, etc., to stimulate economic growth. Taxation, on the other hand, allows the government to collect revenue from individuals and businesses, which can be used to fund public expenditure or manage inflationary pressures.
| 4. What is the difference between expansionary and contractionary fiscal policy? | |
Ans. Expansionary fiscal policy refers to the measures taken by the government to stimulate economic growth and boost aggregate demand. This can be done by increasing government spending or reducing taxes. In contrast, contractionary fiscal policy involves measures to slow down the economy and reduce inflationary pressures. This can be achieved by decreasing government spending or increasing taxes.
| 5. What are the limitations of fiscal policy? | |
Ans. Fiscal policy has certain limitations. One limitation is the time lag between implementing fiscal measures and their impact on the economy. It takes time for the effects of changes in government spending or taxation to be felt. Additionally, fiscal policy may be constrained by political considerations and the availability of funds. Moreover, fiscal policy alone may not be sufficient to address all economic challenges, and a coordinated approach with monetary policy and other measures may be required.
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