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UPSC PYQPrelims 2021

Civil Services Examination · Question 3

Which among the following steps is most likely to be taken at the time of an economic recession?

  1. Cut in tax rates accompanied by increase in interest rate
  2. Increase in expenditure on public projects
  3. Increase in tax rates accompanied by reduction of interest rate
  4. Reduction of expenditure on public projects
Show answer & explanation

Answer: (B) Increase in expenditure on public projects

Explanation

In a recession governments use expansionary fiscal policy, such as higher public spending, to boost demand.