Question

When the Central government cut taxes and increases spending to stimulate the economy during a period of recession, such actions are design to be: 
A. Passive
B. Automatic
C. Countercyclical
D. Nondiscretionary

Answer 1

The correct answer to the following question is C) counter cyclical fiscal policy.

Step-by-step explanation:

Counter cyclical fiscal policy can be defined as a strategy implemented by the government to counter boom or recession in the economy through the fiscal measures. This opposite approach which government uses, like if there is recession in the economy, where demand is low and growth rate is also low, then government here would employ counter cyclical policy where they will reduce taxes and increase the expenditure, which will lead to increase in demand and growth rate, and thus would help in stabilizing economy.