From the following, identify the tools of fiscal policy : (i) Public expenditure (ii) Open market operations (iii) Deficit financing (iv) Taxation (v) Reserve requirements Codes :
(i), (iii) and (iv)
Fiscal policy is the government’s use of its revenue and spending (the budget) to influence income, employment and prices. Monetary policy, in contrast, is run by the central bank and works through money supply and credit.
(i) Public expenditure: government spending on goods, services and transfers is a direct budgetary tool, so it is a fiscal tool.
(ii) Open market operations: buying and selling of government securities by the central bank (RBI) to change liquidity, so it is a monetary tool, not fiscal.
(iii) Deficit financing: financing the gap between government expenditure and revenue through borrowing or creation of money is a budgetary decision, so it is a fiscal tool.
(iv) Taxation: the main source of government revenue and a fiscal tool.
(v) Reserve requirements (CRR/SLR): fixed by the central bank to control the lending capacity of banks, so it is a monetary tool.
The fiscal tools are therefore items (i), (iii) and (iv).
Hence, the answer is (i), (iii) and (iv).
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