Which among the following steps is most likely to be taken at the time of an economic recession?
- A.Cut in tax rates accompanied by increase in interest rate
- B.Increase in expenditure on public projects
- C.Increase in tax rates accompanied by reduction of interest rate
- D.Reduction of expenditure on public projects
▶ Answer & Explanation
Correct answer: B. Increase in expenditure on public projects
During an economic recession, governments often aim to stimulate demand and economic activity. Increasing expenditure on public projects, such as infrastructure development, directly injects money into the economy, creates jobs, and boosts overall spending. This is a key fiscal policy tool used to combat downturns and is generally preferred over contractionary measures like raising taxes or interest rates, which would further dampen economic activity.
Source: UPSC gs1 2021