Which among the following steps is most likely to be taken at the time of an economic recession?
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Answer: B. In a recession demand is weak, so the government uses expansionary fiscal policy: it spends more on public projects to create jobs and incomes. This boosts demand directly. So increasing public expenditure is the most likely step.
Watch for: Options mix one good step with one bad step; check both halves before choosing.
Why the other options are wrong
- A. Wrong because raising interest rates reduces borrowing and spending, which deepens a recession.
- C. Wrong because raising tax rates takes money out of people's hands during a slowdown.
- D. Wrong because cutting public spending reduces demand further.
Source to check: NCERT Class 12, Introductory Macroeconomics, Chapter 5 Government Budget and the Economy
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.