Multiple choice

Which of the following is not an instrument of fiscal policy?

  1. Increase in taxation

  2. Reduction of government expenditure

  3. Rationing of public debt

  4. Increasing the bank rate
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It is not an instrument of fiscal policy, but of monetary policy. The monetary policy is concerned with the regulation of money in the hands of public. The bank rate is increased, and hence the interest on loan is increased and people are discouraged to take loan as they have to pay more interest on loan. Hence, it controls money in the hands of public.

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