Candidates were required to explain fiscal policy and discuss three ways in which the fiscal policies used in a country will affect its national income and employment.
Majority of candidates did not attempt this question. The few candidates who attempted it performed poorly. This reveals candidates' level of preparation.
Fiscal policy consists of variations in the size and content of government income and expenditure to regulate economic activities.
Fiscal policy can affect national income and employment in any of the following ways:
(1) By reducing personal income taxes and company taxes to raise private sector spending that will encourage increased production. This will raise the levels of employment and national income.
(2) Government can increase its own spending to raise aggregate demand.
(3) Government can also pursue a deficit financing i.e. spending in excess of 'what she collects in revenue.
(4) Increased taxation and reduced government spending or budget surplus which may act to decrease the level of national income and employment.
