Answer to Question #245398 in Macroeconomics for john B

Question

In the first quarter of 2020, the economy of South Africa entered a recession. Which of the following best described what you would advice policymakers to do in order to move the economy out of a recession without causing an increase in inflation?

Answer 1

During a recession, the government may employ expansionary fiscal policy by lowering tax rates to increase aggregate demand and fuel economic growth. In the face of mounting inflation and other expansionary symptoms, a government may pursue contractionary fiscal policy.