📚 Learning Guide
Fiscal Policy in Recessions
easy

In the context of fiscal policy during a recession, increasing government spending is to stimulating the economy as decreasing taxes is to what?

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Learning Path
Learning Path

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