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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
- Economics
54. which of the following policies would most likely be recommended in an eoononypwith an smnual inflation rate of 3 per cent and an unemployment rate of 11 pe
54. Which of the following policies would most likely be recommended in an eoononypwith an smnual inflation rate of 3 per cent and an unemployment rate of 11 per cent (1) An increase in trans fer payments end an increase in the reserve requiremeant (2) An increase in defense spending and an increase in the discount rate 3) An increase in income tax rates and a decrease in the rescrve requircment (4) A decrease in the tax rate on coporate profits and a decrease in the dis count rate (2) Ta a 55. Supposc that the ocomomy is operating at full empioyment. If the govecnment wants to discourage consumption spending, stimulate investment spending, and maintaim full-employment outptwbich.ofihe following combinations of monetary and fiscal policies would most likcly achieve these goas7 Monetary Policy Ftscal Policy (1) oarease.money Increase goverament spending (2) Increase money i Increase personal income taxes (3) Docrease maney Decrease goverament spending 4) Decrease money Decrease personal incomě taxes
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Nidhi taparia Best Answer
54. The correct answer is (1). This option suits because increase in transfer payments will help the unemployed class, and an increase in reserve requirement will keep the inflation in check. But even then, none of the options seems wholly right. This is the most suitable one among all.
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Nidhi taparia![best-answer]()
55. Option (2) seems most appropriate. Increasing money supply > interest rate comes down > investment is encouraged. Increase in personal income taxes > reduction in disposable income > discouragement of consumption.