Discussion
Fiscal policy refers to
Answer: B
Correct answer: Government taxes, expenditure and borrowings
Fiscal policy is the Government's use of its budget - what it taxes, what it spends and what it borrows to bridge the gap - to influence the level of activity in the economy.
The first option describes open market operations, which belong to monetary policy and to the Reserve Bank. External borrowing is one component of government borrowing rather than the whole of fiscal policy, and revenue sharing with the states is fiscal federalism - the distribution of what has been raised, not the decision to raise or spend it.
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