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Question

Which of the following action(s) is/are considered a part of the "fiscal stimulus" package?

A Cutting the salary Correct Answer Incorrect Answer
B Increasing the government spending Correct Answer Incorrect Answer
C Abolishing the subsidies Correct Answer Incorrect Answer
D Increasing Tax rates Correct Answer Incorrect Answer
E None of the Above Correct Answer Incorrect Answer

Solution

Fiscal stimulus refers to increasing government consumption or transfers or lowering taxes. Effectively this means increasing the rate of growth of public debt or increasing the government spending for development except that particularly Keynesians often assume that the stimulus will cause sufficient economic growth  to fill that gap partially or completely.

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