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Fiscal And Monetary Policyeconomics-mcqs › fiscal-and-monetary-policy
Published
1 Jun 2019
Last updated
28 May 2026

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Which of the following actions aligns with a reflationary (expansionary) fiscal policy?

Multiple choice question for Fiscal And Monetary Policy. Select an option, then review the explanation below.

Choose the correct answer

Explanation

A reflationary fiscal policy aims to stimulate economic growth by increasing government spending or reducing taxes. However, measures like lowering interest rates or encouraging bank lending are typically monetary policy tools, not fiscal. Among the options, expanding bank lending supports economic expansion by increasing money availability, though it is more a monetary than fiscal action. Increasing corporate taxes would contract the economy, while raising government spending is a direct fiscal expansion. Therefore, boosting bank lending is associated with expansionary policy, but it is primarily a monetary measure.

Practice related questions from the same subject.

  1. 1.Why might a government impose taxes on certain goods or services?
  2. 2.Which statement accurately describes a regressive tax system?
  3. 3.What is the automatic effect on the government's budget balance when the economy experiences growth?
  4. 4.If the marginal tax rate is 40% and an individual's income rises from Rs 10,000 to Rs 12,000, what will be the total tax amount paid?
  5. 5.What does over-funding mean in the context of the State Bank of Pakistan's actions?

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