Question

Besides reduction in CRR and Repo Rate, what other measures can be taken by the Government of India through its budgetary policy to combat recession?

A) Decrease government expenditure
B) Sell government securities in the open market
C) Increase margin requirements on secured loans
D) Decrease taxes

Answer 1

To combat a recession, the Government of India can decrease government expenditure, sell government securities in the open market, and decrease taxes.

Step-by-step explanation:

During a recession, the Government of India can take several measures through its budgetary policy to combat the economic downturn.

1. Decrease government expenditure: By reducing its spending, the government can save money and allocate it towards other areas of the economy that need support. This can stimulate economic growth and help alleviate the recession.
2. Sell government securities in the open market: Selling government securities can provide the government with additional funds that can be used to boost economic activity. This can help counter the effects of a recession.
3. Decrease taxes: Lowering taxes can put more money in people's pockets, which can increase consumer spending. This can have a positive impact on the economy and offset the effects of a recession.