Which among the following steps is most likely to be taken at the time of an economic recession?

Options

1. Cut in tax rates accompanied by increase in interest rate
2. Increase in expenditure on public projects
3. Increase in tax rates accompanied by reduction of interest rate
4. Reduction of expenditure on public project

Correct Answer

Increase in expenditure on public projects

Explanation

During a recession, the government increases public spending to boost aggregate demand and employment, following Keynesian economic policy principles.

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