Which of the following policies is aimed at reducing the

Solution

Fiscal deficit refers to the gap between the government's total expenditure and its total revenue. One of the ways to reduce the fiscal deficit is through disinvestment of public sector enterprises. Disinvestment involves selling a part or the whole of government's equity in public sector enterprises to private investors. This can inject funds into the government's coffers, helping to bridge the deficit. Option A, expansionary monetary policy, is a measure taken by the central bank to stimulate economic growth, which may not directly address fiscal deficits. Decreasing direct taxes (Option B) and increasing public expenditure (Option C) could lead to an increase in the fiscal deficit, not its reduction.