CA Foundation P4 · Chapter 6 · Question 13 of 15
To counter a recession, the government is most likely to:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Increase public expenditure and/or reduce taxes
Explanation
During a recession aggregate demand is deficient, so expansionary (counter-cyclical) fiscal policy - more spending and lower taxes - is used to boost demand. Raising taxes, raising interest rates and cutting money supply are contractionary measures suited to an inflationary boom.
More Business Cycles MCQs
- Q15Which of the following statements about the impact of business cycles is INCORRECT?
- Q1The correct sequence of the phases of a business cycle is:
- Q2Which statement about business cycles is correct?
- Q3Which of the following is generally regarded as a leading indicator of economic activity?
- Q4Industrial production, which moves at the same time as the overall economy, is an example of a: