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    Question

    In the Union Budget 2025–26, the fiscal deficit target

    for FY26 is set at 4.4% of GDP. From a fiscal policy standpoint, this target primarily reflects—
    A Expansionary fiscal policy Correct Answer Incorrect Answer
    B Neutral fiscal policy Correct Answer Incorrect Answer
    C Contractionary fiscal policy Correct Answer Incorrect Answer
    D Discretionary monetary tightening Correct Answer Incorrect Answer
    E Counter-cyclical taxation Correct Answer Incorrect Answer

    Solution

    A reduction in fiscal deficit from 4.8% (FY25 RE) to 4.4% indicates fiscal consolidation, which is a contractionary stance aimed at stabilizing debt and reducing borrowing.

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