a Sapling Learning If the following is a feasible policy response? ment is requi

Question

a Sapling Learning If the following is a feasible policy response? ment is required to balance the budget and the economy falls into a recession, which of the O O O Cut taxes to encourage consumer spending Increase government spending to stimulate the economy Cut spending equal to the reduction in tax revenue Invest in infrastructure increase govement senue What is a likely consequence of this policy? Consumer spending increases due to their ability to keep more O O O oftheir after-tax income The negative consequences of the recession are magnified There is hyperinflation due to an increase in aggregate demand Unemployment falls due to the economic stimulus Previous Check Answer Next

Explanation / Answer

1) B

Increase in government spending will have multiplier effect which will lead to increase in GDP, So the economy can get out of recession.

2) D

Due to stimulation of economy unemployment will fall.

Government spending is very good method of tackling inflation but it can also be dangerous if government runs out of cash, It needs to be done in a very balanced way.

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