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Introductory Macroeconomics

Class 12 · Economy

Ch 4 · Determination of Income and Employment

Real UPSC Prelims questions from 2016–2026, linked to this book. Try each one first, then open the answer. 2026 answers follow UPSC's provisional answer key.

Prelims 2021 · Q3

Which among the following steps is most likely to be taken at the time of an economic recession?

  1. (a)Cut in tax rates accompanied by increase in interest rate
  2. (b)Increase in expenditure on public projects
  3. (c)Increase in tax rates accompanied by reduction of interest rate
  4. (d)Reduction of expenditure on public projects
Show answer

UPSC's answer: (b)

NCERT answers it: Class 12 Introductory Macroeconomics, Ch 4 (Determination of Income and Employment).

How to solve it with NCERT: Class 12 Macroeconomics, ch 4: government spending is part of aggregate demand, and extra spending raises output by more than itself (the multiplier). In a recession you want more demand, so you raise public spending. Higher taxes or interest rates, or fewer projects, would deepen the slump. Answer (b).

Hindi version: UPSC's official question paper (2021), question 3 ↗

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