New Click here to Attempt NABARD Scholarship Test

    Question

    Read the following paragraph and answer the question that follows: "Fiscal policy refers to the use of government spending and taxation to influence the economy. During periods of high inflation, a government may adopt contractionary fiscal policy by decreasing public spending, increasing taxes, or both, to reduce economic activity and control inflation. The effectiveness of fiscal policy depends on various factors, including the state of the economy, the level of government debt, and the responsiveness of consumers and businesses to changes in fiscal measures."

    What is the primary goal of implementing expansionary

    fiscal policy during a recession?
    A To increase interest rates Correct Answer Incorrect Answer
    B To reduce government debt Correct Answer Incorrect Answer
    C To stimulate economic activity Correct Answer Incorrect Answer
    D To control inflation Correct Answer Incorrect Answer
    E To decrease public spending Correct Answer Incorrect Answer

    Solution

    The primary goal of implementing expansionary fiscal policy during a recession is to stimulate economic activity by increasing public spending, reducing taxes, or both.

    Practice Next