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Q4. Which of the policies, either monetary or fiscal, has the most immediate effect on the economy?
(1 mark)

Q5. State whether these fiscal and monetary policies are expansionary or restrictive in nature.
a) The government announces tax cuts for public servants.
b) The EPNG sells treasury bills to the public.
(1 mark each)

Q6. In November 2011, the Minister for Finance presented a budget that proposed an import duty on staple foods. The budget was thrown out, and the government was defeated. The Minister for Finance was trying to spread or broaden the tax base.
i. What does 'spreading or broadening the tax base' mean?



Answer :

GinnyAnswer

Final answer:

Expansionary fiscal policy has the most immediate impact on the economy. Tax cuts for public servants are expansionary, while selling treasury bills is a monetary policy that could be restrictive. Broadening the tax base involves increasing the number of taxpayers who contribute to the tax system.


Explanation:

Expansionary fiscal policy has the most immediate effect on the economy as it involves increasing government spending or reducing tax rates to boost aggregate demand quickly.

Regarding the provided scenarios:

  1. a) Tax cuts for public servants are expansionary as they increase disposable income, leading to higher spending.
  2. b) Selling treasury bills is a monetary policy and can be restrictive if it reduces money supply, impacting spending negatively.

'Spreading or broadening the tax base' means increasing the number or range of taxpayers contributing to the tax system, distributing the tax burden across a wider population for revenue generation.


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