Question

Which of the following is an example of government expenditure used as an instrument of fiscal policy?

Options

• Expenditure on public works programmes (roads, dams, bridges, etc.)

• Issuing new currency to meet the budget deficit

• Collection of sales tax and excise duty

• Borrowing from the public through government bonds

Answer 1

Government expenditure instruments include expenditure on public works programmes (roads, dams, bridges, etc.), education and public welfare programmes, defence and maintenance of law and order, and subsidies to encourage production. Tax collection, public borrowing and currency issuance belong to the revenue side.