This was another question that was not popular with candidates as it was ignored by most of them. Those who care to attempt it could not give a standard or satisfactory definition of the concept.
The (b) part of the question was largely not touched by the candidates who attempted the question. It was evident candidates did not understand the question well enough thus wrong answers were offered by most of the candidates. The overall candidates’ performance in the question was bad. In order to score high marks in the question, candidates were expected to present their answers as follows:
(a) Fiscal policy is defined as the use of taxation and government expenditure to regulate economic activities.
(b) (i) Inflation: A country that is experiencing inflation can employ
a restrictive fiscal policy such as:
(a) cutting down on government expenditure;
(b)
raising taxes on incomes to reduce disposable incomes;
(c)
reducing tariffs on essential imported goods;
(d)
increasing subsidies on agricultural production.
(ii) Unemployment: Unemployment can be curtailed by:
(a) Increasing government expenditure e.g. award of contracts; improving socio-economic infrastructure
and increased funding of government agencies;
(b) encouraging private enterprises through tax reliefs
and concessions so as to increase production.
(c) increasing government expenditure to establish
state enterprises;
(d) reducing tax on personal incomes to increase
aggregate demand.
(iii) Balance of payments: An unfavourable balance of payment
can be corrected by:
(a) increasing tax on non-essential goods and goods that
can be produced locally to reduce import volume;
(b) giving tax reliefs and concessions to local entrepreneur so as to increase exports;
(c) reducing government expenditure to reduce government absorption of output. |
