Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Reducing household savings
B
Encouraging consumer spending
C
Increasing government debt
D
Lowering interest rates
Understanding the Answer
Let's break down why this is correct
Answer
In the context of fiscal policy during a recession, increasing government spending helps stimulate the economy by creating jobs and increasing demand for goods and services. Similarly, decreasing taxes also aims to stimulate the economy by leaving people with more money to spend. When taxes are lowered, individuals and businesses have extra cash, which they can use to buy things or invest, boosting overall economic activity. For example, if the government cuts taxes, a family may have more money to buy a new car, which helps the car dealership and encourages more production. Both strategies are designed to encourage spending and help the economy recover during tough times.
Detailed Explanation
When taxes go down, people have more money to spend. Other options are incorrect because Some might think lowering taxes means people save less; People might think that lower taxes lead to more debt.
Key Concepts
Fiscal Policy
Aggregate Demand
Economic Recovery
Topic
Fiscal Policy in Recessions
Difficulty
easy level question
Cognitive Level
understand
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