Which of the following is an example of a counter-cyclical fiscal policy?
A. Reducing taxes during a recession
B. Increasing government spending during a boom
C. Increasing taxes during a recession
D. Reducing government spending during a recession
Answer: Option A
Solution (By JKSSB Mock Tests)
Counter-cyclical fiscal policy aims to stabilise the economy by increasing spending or cutting taxes during downturns and doing the opposite during booms.
Explanation:
Revenue expenditure is incurred for the normal running of government departments and does not result in the creation of assets or reduction of liabilities.
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