Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It reduces unemployment by directly creating jobs and stimulating consumption.
B
It raises interest rates, making borrowing more expensive and slowing growth.
C
It crowds out private investment, leading to a decrease in overall economic activity.
D
It increases taxes on businesses, which incentivizes them to hire more workers.
Understanding the Answer
Let's break down why this is correct
Answer
Increasing government spending during a recession can boost aggregate demand, which is the total amount of goods and services people want to buy. When the government spends more money, it can create jobs and pay for projects like building roads or schools. This extra spending means that more money goes into the economy, allowing people and businesses to spend more as well. For example, if the government builds a new bridge, the workers get paid, and they will spend their wages on things like food and clothes, which helps local stores. As a result, this increased spending can help lift the economy out of a recession by encouraging more consumption and investment.
Detailed Explanation
When the government spends more money, it creates jobs. Other options are incorrect because Some think that more government spending raises interest rates; It's a common belief that government spending takes away money from private businesses.
Key Concepts
Fiscal Policy
Aggregate Demand
Recession Effects
Topic
Fiscal Policy in Recessions
Difficulty
hard level question
Cognitive Level
understand
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