📚 Learning Guide
Fiscal Policy in Recessions
easy

If a government increases its spending during a recession, what is the primary effect this action aims to achieve?

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

Increase aggregate demand to stimulate economic growth

B

Decrease inflation rates to stabilize prices

C

Reduce unemployment by cutting taxes

D

Encourage savings to improve future investments

Understanding the Answer

Let's break down why this is correct

Answer

When a government increases its spending during a recession, the main goal is to stimulate the economy. This means that by spending more money, the government hopes to create jobs and increase demand for goods and services. For example, if the government builds new roads or schools, it not only employs workers but also encourages businesses to supply materials and services for these projects. As people earn money from these jobs, they will spend more, which helps boost overall economic activity. This process helps lift the economy out of a recession by making sure more people have money to spend and businesses can grow.

Detailed Explanation

When the government spends more money, it helps people and businesses buy things. Other options are incorrect because Some might think that spending more will lower prices; It's a common belief that cutting taxes is the best way to reduce unemployment.

Key Concepts

Fiscal Policy
Aggregate Demand
Economic Growth
Topic

Fiscal Policy in Recessions

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.