Question : The process of increasing taxes and/or decreasing government spending in order to slow down an overheating economy is known as:
Option 1: Fiscal austerity
Option 2: Fiscal stimulus
Option 3: Fiscal responsibility
Option 4: Fiscal consolidation
Correct Answer: Fiscal austerity
Solution : The correct answer is (a) Fiscal austerity.
Fiscal austerity refers to the deliberate reduction in government spending and/or an increase in taxes to control an overheating economy. This approach aims to reduce the budget deficit or achieve a budget surplus by limiting government expenditures and increasing revenue. The goal of fiscal austerity is to bring the economy back into balance by curbing inflation, reducing public debt, and promoting fiscal responsibility.
