47th B.P.S.C. (Pre) 2005

Which one of the following is not a tool of fiscal policy?

aTaxation
bPublic expenditure
cInterest rate✓ Correct
dPublic debt

Explanation

Among the above options, taxation, public expenditure, and public debt are instruments of fiscal policy, whereas the interest rate is an instrument of monetary policy. Fiscal policy relates to the General Government, while monetary policy is implemented through the Monetary Policy Committee (MPC) under the Reserve Bank of India (RBI).

economic-social-development