Identify the fiscal measures from the following that will help correct excess demand

1. Decrease in Repo rate
2. Increase in taxes
3. Decrease in government expenditure
4. Increase in Repo rate
5. Decrease in taxes

B and C only

First of all option A and D, will be eliminated as they are the monetary tools on the basis of which money supply is regulated in the economy. In the question we are talking about the fiscal measures, so, we are left with option B, C and E. In order to correct the excess demand we need to reduce the money supply in the economy. Increasing the tax rate will reduce the money remaining in the hand of the public resulting in a reduced demand in the economy. And reduction in the government expenditure causes withdrawal in the expenditure in the economy. As a result, money supply in the economy and purchasing power of people get decreased. Thus, the correct option is B and C only.