Which among the following steps is most likely to be taken at the time of an economic recession?
Answer & explanation
Answer: (b) Increase in expenditure on public projects
A recession is a shortfall of demand, so the remedy is to add demand. Government spending on public projects is itself part of aggregate demand and, through the multiplier, raises output and income by more than the amount spent.
- ✓ (b) Higher public spending directly adds to aggregate demand, creates jobs and incomes, and so counters the slump.
- ✗ (a) The tax cut helps, but raising interest rates at the same time makes borrowing dearer and holds back investment and consumption, working against recovery.
- ✗ (d) Cutting public spending removes demand from an economy that already lacks it and would deepen the recession.
Remember · Recession = too little demand. Counter it with expansionary fiscal policy (more public spending, lower taxes) and easier money (lower interest rates).
📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 4 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter)
Sources
- NCERT Class 12 · Introductory Macroeconomics, Chapter 4 “Government, through its expenditure G on final goods and services, adds to the aggregate demand like other firms and households.”
- NCERT Class 12 · Introductory Macroeconomics, Chapter 5 “Through changes in its expenditure and taxes, the government attempts to increase output and income and seeks to stabilise the ups and downs in the economy.”
Question and answer: UPSC's official GS Paper I (2021, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·