Which of the following statements appropriately describes lsquo Fiscal Stimulus rsquo ........

Economic Affairs Public Finance and Debt Management

Which of the following statements appropriately describes ‘Fiscal Stimulus’?

It is the massive investment of the government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth.

It is to boost economic activity in the country by undertaking government expenditure.

It is government’s intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sector to promote greater food production and contain food inflation.

It is an extreme affirmative action by government to pursue its policy of financial inclusion.

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Explanation:

Fiscal stimulus refers to increasing government consumption or transfers or lowering taxes. Effectively this means increasing the rate of growth of public debt, except that particularly Keynesians often assume that the stimulus will cause sufficient economic growth to fill that gap partially or completely.