Question

Under the Keynesian approach, fiscal policy is primarily used to:

Options

• Control the quantity of money in circulation

• Fix prices of individual commodities in the market

• Determine the exchange rate of the currency

• Stabilise output and employment

Answer 1

Fiscal policy plays a role in influencing income, production, employment, and the overall level of economic activity. Based on the Keynesian approach, it is used to stabilise output and employment through changes in government expenditure and taxation.