Question : Fiscal Policy is formulated by_______ It aims to bring changes in aggregate demand by altering the ________
Option 1: Central Government, Purchasing Power
Option 2: Central Bank, Purchasing Power
Option 3: Central Government, Money Supply
Option 4: Central Bank, Money Supply
Correct Answer: Central Government, Purchasing Power
Solution : The correct answer is (a) Central Government, Purchasing Power.
Fiscal policy is formulated by the Central Government, not the Central Bank. Fiscal policy refers to the use of government spending and taxation to influence the overall state of the economy. It is a tool used by the government to achieve macroeconomic objectives such as economic growth, price stability, and employment.
Fiscal policy aims to bring changes in aggregate demand by altering the purchasing power of individuals and households. The government can do this by adjusting its expenditure levels, changing tax rates, and implementing various fiscal measures. By increasing or decreasing government spending and taxation, fiscal policy can influence the level of disposable income and consumption in the economy, thereby impacting aggregate demand.
