The correct answer is: d) All of the above
Fiscal policy is the use of government spending and taxation to influence the economy. It is one of the two main tools of macroeconomic policy, along with monetary policy.
Fiscal policy can be used to stabilize the economy by managing aggregate demand. When the economy is in a recession, the government can increase spending or cut taxes to stimulate demand. When the economy is overheating, the government can reduce spending or raise taxes to cool demand.
Fiscal policy can also be used to promote growth by investing in infrastructure, education, and research and development. These investments can help to create jobs and boost productivity.
Finally, fiscal policy can be used to achieve social objectives such as reducing poverty and inequality. The government can use taxes and spending to redistribute income and provide social services.
In Andhra Pradesh, fiscal policy has been used to achieve all of these objectives. The state government has invested heavily in infrastructure, education, and health care. It has also implemented a number of programs to reduce poverty and inequality. As a result, Andhra Pradesh has experienced strong economic growth and social progress in recent years.
Here is a brief explanation of each option:
- a) Stabilize the economy: Fiscal policy can be used to manage aggregate demand, which is the total demand for goods and services in the economy. When aggregate demand is too low, the economy may experience a recession. The government can increase spending or cut taxes to stimulate demand and boost economic growth. When aggregate demand is too high, the economy may experience inflation. The government can reduce spending or raise taxes to cool demand and bring inflation under control.
- b) Promote growth: Fiscal policy can be used to invest in infrastructure, education, and research and development. These investments can help to create jobs and boost productivity, which can lead to economic growth.
- c) Achieve social objectives: The government can use taxes and spending to redistribute income and provide social services. This can help to reduce poverty and inequality.