Question

Suppose that the economy is in the midst of a recession. Which of the following policies would most likely end the recession and stimulate output growth? Question 30 options: A) A congressional proposal to incur a federal surplus to be used for the retirement of public debt. B) Reductions in federal tax rates on personal and corporate income. C) Postponement of a highway construction program. D) Reductions in agricultural subsidies and veterans' benefits.

Answer 1

Answer:

B) Reductions in federal tax rates on personal and corporate income.

Explanation:

A recession is when there's a persistent decline in the economy. It is when the GDP growth rate for two consecutive quarters are negative.

In a recession, government ought to increase its spending and reduce taxes in order to increase disposable income and stimulate demand. These are expansionary fiscal policies.

Postponement of a highway construction program and reductions in agricultural subsidies and veterans' benefits reduces government spending.

When the government has a surplus, it either increases taxes or reduces spending which aren't expansionary fiscal policy.