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UPSC 2021: Which among the following steps is most likely to be taken at the time of an economic recession?
(a)Cut in tax rates accompanied by increase in interest rate
(b)Increase in expenditure on public projects
(c)Increase in tax rates accompanied by reduction of interest rate
(d)Reduction of expenditure on public projects
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Not attemptedCorrect Answer: (c) Increase in tax rates accompanied by reduction of interest rate
During a recession the government pursues expansionary fiscal policy; raising public-project expenditure directly injects demand, creating jobs and triggering a multiplier effect. The other options either tighten fiscal/monetary conditions or contract spending and would deepen, not alleviate, recessionary pressures. ([vajiramandravi.com](https://vajiramandravi.com/upsc-exam/which-among-the-following-steps-is-most-likely-to-be-taken-at-the-time-of-an-economic-recession/?utm_source=openai))
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Frequently Asked Questions
What is the correct answer to this UPSC 2021 Indian Economy question?▼
The correct answer is option (c): Increase in tax rates accompanied by reduction of interest rate. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Fiscal Policy & Budget question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2021, GS Paper 1, as Question 11. It falls under Indian Economy > Fiscal Policy & Budget.
What is the difficulty level of this UPSC question?▼
This question is rated "easy". It tests basic recall and most well-prepared aspirants should answer it correctly.
How many UPSC Prelims questions have been asked from Fiscal Policy & Budget?▼
UPSC has asked 44 questions from Fiscal Policy & Budget (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.