Consider the following statements: 1. An additional spending by the Government of X is likely to have less impact on income than an additional transfer of X to households. 2. An additional spending by the Government of X is likely to have less impact on i

examrobotsa's picture

Submitted by examrobotsa on

Q: 107 (CDS-II/2024)
Consider the following statements:
1. An additional spending by the Government of X is likely to have less impact on income than an additional transfer of X to households.
2. An additional spending by the Government of X is likely to have less impact on income if it is not accompanied by an expansion in money supply.
Which of the statements given above is/are correct?

question_subject: 

Economics

question_exam: 

CDS-II

Statement 1 is incorrect as government spending generally has a greater multiplier effect on income compared to direct transfers. Statement 2 is correct; without expansion in the money supply, spending has limited impact on income due to liquidity constraints.