Government's taxation and public Expenditure polices are collectively known as __________.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Fiscal Policy
Fiscal policy is the government’s use of its expenditure and taxes. Through changes in them, it tries to raise output and income and keep the economy stable.
Option (1) Fiscal Policy — Correct. Taxation and public expenditure are its two tools, set out each year in the government budget.
Option (2) Monetary policy — Incorrect. Monetary policy is run by the central bank. It controls the money supply through tools such as the bank rate, the reserve ratios and open market operations.
Option (3) Business policy — Incorrect. This is a firm’s own plan for running its business, not a government policy.
Option (4) GST policy — Incorrect. GST, the Goods and Services Tax, is one indirect tax. It is a single part of taxation and leaves out public expenditure.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| – | – | – | 12-06 S2 12-06 S3* | – |
* A similar question.
NCERT (2026-27): “Tax Reforms: Tax reforms are concerned with the reforms in the government’s taxation and public expenditure policies, which are collectively known as its fiscal policy. There are two types of taxes: direct and indirect. Direct taxes consist of taxes on incomes of individuals, as well as, profits of business enterprises. Since 1991, there has been a continuous reduction in the taxes on individual incomes as it was felt that high rates of income tax were an important reason for tax evasion.…” |