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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
- Economics
27. in a stagnant economy, a government should: (1) spend more, tax less and/or pursue an contractionary monetary policcy (2) spend less, tax less and/or pursue
27. In a stagnant economy, a government should: (1) Spend more, tax less and/or pursue an contractionary monetary policCy (2) Spend less, tax less and/or pursue an expansionary monetary policy 0) Spend more, tax less and/or pursue an expansionary monetary policy (4) Tax more, spend less and/or pursue an expansionary monetary policy
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Option (3) is right. In a stagnant economy, government must - 1. Spend more; because increased government expenditure will increase GDP directly and then later through multiplier as well. But this spending should be productive in nature like infrastructure and education and not in the form of just subsidies. 2. Tax less; because this will promote economic activity further. 3. Pursue expansionary monetary policy; because increase in money supply will bring interest rates down and increase investment.