📚 Learning Guide
Fiscal Policy in Recessions
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Which of the following actions can a government take as part of fiscal policy to stimulate the economy during a recession? Select all that apply.

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Choose the Best Answer

A

Increase government spending on infrastructure projects

B

Raise income taxes to reduce the budget deficit

C

Provide tax rebates to households to boost consumer spending

D

Cut social welfare programs to lower government expenditures

E

Implement subsidies for businesses to encourage hiring

Understanding the Answer

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Answer

During a recession, a government can take several actions as part of fiscal policy to help stimulate the economy. One important action is increasing government spending on projects like building roads or schools, which creates jobs and puts money into people's hands. Another action is cutting taxes, allowing families and businesses to keep more of their money to spend or invest, which can boost demand for goods and services. For example, if the government decides to build a new bridge, it not only provides immediate jobs for construction workers but also helps local businesses thrive as more people come to the area. These actions can help jumpstart economic activity and support recovery during tough times.

Detailed Explanation

In a recession, the government usually increases spending or cuts taxes to help people spend more money. Other options are incorrect because Spending on projects can help, but this option is marked wrong; Raising taxes takes money away from people.

Key Concepts

Fiscal Policy
Aggregate Demand
Economic Recession
Topic

Fiscal Policy in Recessions

Difficulty

medium level question

Cognitive Level

understand

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