2011 GS Paper I, all questions

UPSC Prelims 2011 · GS Paper I

Question 8: Economy and Social Development

Which one of the following statements appropriately describes the "fiscal stimulus" ?

aIt is a massive investment by the Government in manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth
bIt is an intense affirmative action of the Government to boost economic activity in the country
cIt is Government's intensive action on financial institutions to ensure disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation
dIt is an extreme affirmative action by the Government to pursue its policy of financial inclusion

AnswerThe answer is (b).

A fiscal stimulus is a deliberate step by the government, through higher spending, tax cuts or both, to revive demand and push up economic activity when growth is weak. The packages announced in 2008-09 after the global financial crisis are the usual example. It is not confined to manufacturing investment, farm credit or financial inclusion; those are narrower policies with different aims. Remember: stimulus means the government using its budget actively to boost the economy.

Why each option is right or wrong
  • (a) Too narrow: a stimulus is not limited to manufacturing and it works on demand, not only supply.
  • (b) Right: a government action to boost economic activity.
  • (c) Describes directed credit to agriculture, not a fiscal stimulus.
  • (d) Describes financial inclusion policy, which has a different aim.

Explanation: written by UPSC Grade, not by UPSC.

Practise this paper timedPrevious questionNext question

Source: UPSC, Civil Services (Preliminary) Examination 2011, General Studies Paper I, Series A. The paper on upsc.gov.in.