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

[A] Cut in tax rates accompanied by increase in interest rate

[B] Increase in expenditure on public project

[C] Increase in tax rates accompanied by reduction of interest rate

[D] Reduction of expenditure on public projects

Answer: B

Why this question) Aatma nirbhar Bharat scheme announced an economic stimulus package for Rs 20-lakh-crore (estimated at 10% of the GDP), amid Covid pandemic.  

Ans) b 

Exp) Option b is correct. 

Economic Recession refersto a significant decline in general economic activity in a designated region. Increase in expenditure on public projects will have a multiplier effect on the pace of economic growth of the country. Public expenditure has the expansionary effect on the growth of national income, employment opportunities, etc.  

Private investors are incapable of making massive investments on the various infrastructural projects like road-bridge-dam construction, power plants, transport and communications, etc. It is imperative that the government undertakes such projects. Greater the public expenditure, higher is the level of economic development. 

Source)  Public Expenditure: Causes, Principles and Importance (economicsdiscussion.net) 

Subject) Economics