Consider the following actions by the Government: 1. Cutting the tax rates 2. Increasing the government spending 3. Abolishing the subsidies In the context of economic recession, which of the above actions can be considered a part of the `fiscal stimulus`

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Q: 109 (IAS/2010)
Consider the following actions by the Government:
1. Cutting the tax rates
2. Increasing the government spending
3. Abolishing the subsidies In the context of economic recession, which of the above actions can be considered a part of the 'fiscal stimulus' package?

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,205,116,205,58,16,42

keywords: 

{'fiscal stimulus': [0, 0, 1, 1], 'subsidies': [1, 0, 0, 1], 'economic recession': [0, 0, 0, 3], 'tax rates': [0, 1, 1, 1], 'actions': [1, 0, 2, 5], 'above actions': [0, 0, 1, 0], 'government': [5, 0, 0, 1], 'package': [0, 0, 1, 0], 'part': [12, 1, 5, 10]}

In the context of economic recession, fiscal stimulus refers to measures taken by the government to increase its own spending or lower taxes to stimulate economic activity and boost demand. Therefore, out of the given options, cutting tax rates and increasing government spending are the two actions that can be considered a part of the fiscal stimulus package. The rationale behind these actions is that lower taxes leave more money in the hands of consumers, which increases their spending, and increased government spending directly injects money into the economy, both of which can help to boost demand during a recession. Abolishing subsidies, on the other hand, can lead to reduced demand in certain sectors and may not necessarily stimulate the economy during a recession. Therefore, the correct answer is option (A) 1 and 2 only.

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