ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -These include aggregate demand for goods and services, employment, inflation, and economic growth. During a recession, the government may lower tax rates or increase spending to encourage demand and spur economic activity. Conversely, to combat inflation, it may raise rates or cut spending to cool down the economy.

Detailed explanation-2: -Fiscal policy is enacted by a country’s government through spending and taxes to influence a nation’s economic conditions. To help fight a recession, fiscal policy may aim to lower taxes and increase federal spending to increase aggregate demand.

Detailed explanation-3: -The U.S. Federal Reserve employs expansionary policies whenever it lowers the benchmark federal funds rate or discount rate, decreases required reserves for banks or buys Treasury bonds on the open market.

Detailed explanation-4: -If aggregate demand were to fall sharply so that a recession occurs, then the prescription would be for expansionary fiscal policy-some mix of tax cuts and spending increases.

Detailed explanation-5: -Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.