Consider the following statements: 1. Expansionary fiscal policy is used to stimulate economic activity during periods of recession by increasing government spending or reducing taxes. 2. Contractionary fiscal policy is aimed at curbing inflation by withdrawing money from the market through increased taxation or reduced government expenditure. 3. Both expansionary and contractionary fiscal policies are implemented by the Reserve Bank of India. Which of the statements given above is/are correct? |ForumIAS

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: A

Notes:

Explanation:

Expansionary fiscal policy boosts demand during a downturn through higher spending or lower taxes.
Contractionary policy addresses inflation through spending cuts or tax hikes.
Fiscal policies are implemented by the government, not the RBI. The RBI implements monetary policy.

Source: Indian Economy (NCERT)