Question

Neutral, expansionary, and contractionary strategies are related to which policy of the government?
1. Monetary policy
2. Banking policy
3. Budgetary policy
4. Fiscal policy

Answer 1

Correct Answer - Option 4 : Fiscal policy

The Correct Answer is Fiscal Policy.

 

• Fiscal policy refers to the use of government spending and tax policies to influence economic conditions.
• Fiscal policy is largely based on ideas from John Maynard Keynes, who argued governments could stabilize the business cycle and regulate economic output.
• During a recession, the government may employ expansionary fiscal policy by lowering tax rates to increase aggregate demand and fuel economic growth.
• When inflation mounts, the government may pursue a contractionary fiscal policy.