ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -During a recession, he explains, the longstanding consensus has been to rely on monetary policy by lowering interest rates. Once that approach stops working, there’s typically a switch to fiscal policy, such as issuing stimulus checks. As he points out, once rates get too low, they can’t be cut any further.

Detailed explanation-2: -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-3: -During periods of economic boom, money supply tends to grow quickly as commercial banks make more loans. Recessions, on the other hand, tend to be preceded by slowing rates of money supply growth. However, money supply growth tends to begin growing again before the onset of recession.

Detailed explanation-4: -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.