10/02/2026
SECTION B: MACRO ECONOMICS
MEGA ONLINE SCHOOL ARTS
ECONOMICS A'L
LITTORAL MOCK 2025
LESSON
SECTION B: MACRO ECONOMICS
7a) What is meant by the term discretionary fiscal policy? (10mrks)
b] Under what conditions will the national debt be a burden to the economy?(10mrks)
Solution
Fiscal policy refers to policies used by the government to control economic activities in a country or economy by the use of taxes and subsidies.
Or
Fiscal policy is the manipulation of government income and expenditures to influence the level of economic activity. The major instrument of fiscal policy is called budget.
Discretionary fiscal policy refers to deliberate changes in government spending or taxation to influence the overall levels of economic activities..The changes made by the government to achieve specific economic objectives or to control economic growth and development, reduce unemployment rate, ensure balance regional development etc
•To promote economic growth and development the government can reduce taxes and grant tax holidays to newly established industries inorder to encourage foreign investment.
•To raise standard of living of citizens the government reduces trade barriers inorder to imports varieties of products
•To reduce unemployment rate, the government grant unemployment benefits and grant subsidies to firms to reduce their cost of production inorder to boost outputs and profits
•To control inflation, the government devaluate the currency of a country inorder to make exports cheaper and reduce imports
•To promote regional equality the government can charge high taxes on industries located in cities and little or no taxes to industries located in rural areas this helps to create employment opportunities and reduce rural exodus.
b) National debt refers to the accumulation of all total government borrowings within and out of a country over a period of time say one year. National debt backed by real assets to carryout development projects a