📚 Learning Guide
Expansionary Fiscal and Monetary Policies
easy

During a recession, the government decides to implement an expansionary fiscal policy by increasing its spending on infrastructure projects. What is the most likely immediate effect of this policy on the economy?

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Increased aggregate demand leading to job creation

B

Higher interest rates that discourage borrowing

C

A decrease in inflation due to reduced spending

D

A balanced budget resulting from increased tax revenues

Understanding the Answer

Let's break down why this is correct

Answer

When the government increases its spending on infrastructure projects during a recession, it puts more money into the economy. This spending creates jobs for workers who build roads, bridges, and schools. As these workers earn wages, they have more money to spend on things like food and clothing, which helps local businesses. For example, if a new highway is built, construction workers will spend their paychecks at nearby stores, boosting sales and helping those businesses stay open. Overall, this immediate effect can help reduce unemployment and encourage economic growth during tough times.

Detailed Explanation

When the government spends more on projects like roads and bridges, it creates jobs. Other options are incorrect because Some might think that government spending raises interest rates; It's a common belief that spending less lowers prices.

Key Concepts

Expansionary Fiscal Policy
Aggregate Demand
Economic Recession
Topic

Expansionary Fiscal and Monetary Policies

Difficulty

easy level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.