Understanding Fiscal Policy and Economic Growth

Governments play a critical role in promoting economic growth and development through various policy measures. One common approach is through the implementation of fiscal policies. Fiscal policy refers to the use of government spending and taxation to influence the economy.

Consider the following statements regarding fiscal policy:

1. It can stimulate demand by increasing government spending.

2. Fiscal policy is always effective in the short term regardless of the economic conditions.

3. Increasing taxes can slow down economic growth.

Based on the information above, which of the following options accurately captures the role of government policies in economic growth?