Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
By reducing government spending
B
By increasing taxation
C
By financing public investments and stimulating demand
D
By decreasing the money supply
Understanding the Answer
Let's break down why this is correct
Answer
A budget deficit during a recession can help the economy recover by allowing the government to spend more money than it collects in taxes. This extra spending can support jobs and stimulate demand for goods and services, which is important when people are not spending as much. For example, if the government invests in building new roads or schools, it creates jobs for construction workers and boosts local businesses. Even though the government is borrowing money, this spending can lead to increased economic activity, helping the economy grow again. In the long run, as the economy improves, higher tax revenues can help pay off the deficit.
Detailed Explanation
When the government spends more money than it earns, it can invest in projects. Other options are incorrect because Some think cutting spending helps the economy; Many believe raising taxes brings in more money for the government.
Key Concepts
budget deficit
economic recovery
Topic
Fiscal Policy in Recessions
Difficulty
medium 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.