Which one of the following statements appropriately describes the “fiscal stimulus”?
[UPSC Civil Services Exam – 2011 Prelims]
(a) It is a massive investment by the Government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth
(b) It is an intense affirmative action of the Government to boost economic activity in the country
(c) It is Government’s intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation
(d) It is an extreme affirmative action by the Government to pursue its policy of financial, inclusion
Answer: (b)
Explanation:
- Fiscal stimulus refers to government actions aimed at boosting private sector economic activity through expansionary monetary or fiscal policies.
- It draws from Keynesian economics and involves using government policy as a stimulus to elicit a response from the private sector economy.
- Economic stimulus measures are typically employed during recessions.
- Examples of policy tools used for stimulus include lowering interest rates, increasing government spending, and implementing quantitative easing.
