Answer to Question #249790 in Macroeconomics for Question 2

Question

Which of the following are fiscal policy measures that might be used to reduce a South African budget deficit?

• I. Increasing taxes
• II. Decreasing government spending 
• III. Increasing interest rates

I and II only.

I and III only.

I, II, and III.

II only.

Answer 1

I and II only.

I. Increasing taxes - higher taxes will result in an increase in revenue and this helps in the reduction of budget deficit.

II. Decreasing government spending - cutting down government expenditures in areas that do not create many jobs helps in the reduction of budget deficit.