📚 Learning Guide
Recession and Fiscal Policy Actions
easy

What is one primary action a government can take to combat a recession through fiscal policy?

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Learning Path
Learning Path

Question & Answer
1
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2
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3
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4
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Choose the Best Answer

A

Increase government spending

B

Decrease taxes

C

Reduce interest rates

D

All of the above

Understanding the Answer

Let's break down why this is correct

Answer

One primary action a government can take to combat a recession through fiscal policy is to increase public spending. When the economy is struggling, people may not spend as much money, which can lead to businesses earning less and possibly laying off workers. By increasing government spending on projects like building roads or schools, the government creates jobs and puts money into the economy. For example, if a government decides to invest in a new highway, it not only hires construction workers but also helps local businesses by increasing traffic and demand. This boost in spending can help the economy recover by encouraging people to spend again, leading to more jobs and growth.

Detailed Explanation

When the government increases spending, it puts more money into the economy. Other options are incorrect because Some think lowering taxes helps people spend more; Reducing interest rates can help people borrow money, but it is not a direct action of fiscal policy.

Key Concepts

government spending
Topic

Recession and Fiscal Policy Actions

Difficulty

easy level question

Cognitive Level

understand

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