Fiscal Policies

Q. What is the logic behind increasing income tax at the time of inflation?

1. People will have more money to spend, which will increase the demand for goods. This will decrease the price level.
2. People will have less money to spend, which will increase the demand for goods. This will increase the price level.
3. People will have less money to spend, which will decrease the demand for goods. This will decrease the price level.
4. People will have more money to spend, which will increase the demand for goods. This will increase the price level.

Q.

The Government can achieve its budget objective of ‘redistribution of income’ by?

1. a) Rationalization of taxes in pro-poor direction

2. b) Bringing the production of goods and services under its direct and absolute control

3. c) Increasing the Gross Domestic Production (GDP) of the country.

4. d) Managing the general price level in the economy to the desired level.

Q. Suppose you are the Finance Minister of a country. You found that your country has an inflation rate of 70%. This is not a desirable state of your country's economy. Which of the following will be the right steps to be taken to address this issue?

1. Adopt fiscal policies that give money to the hands of the public
2. Adopt fiscal policies that take money from the hands of the public
3. Increase the income tax rate
4. Decrease the income tax rate

Q. is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

1. Monetary policy
2. Fiscal policy
3. Financial policy
4. Bank rate policy

Q. The general price level in an economy decreases during deflation.

1. True
2. False

Q. Who makes changes to the fiscal policy of a country?

1. The central bank of that country
2. The government of that country
3. The state governments of that country
4. The domestic banks of that country

Q. Which among the following measures is not considered to be a part of fiscal policy?

1. Changing tax rates
2. Announcing new welfare schemes
3. Increasing the interest rate
4. Decreasing government expenditure

Q. Which of the following scenarios can be termed as inflation?

1. Price level increase
2. Price level decrease
3. Price level remaining constant
4. Price level reducing to zero

Q. What are fiscal policies? How can the government correct the situation of inflation and deflation through fiscal policies?