Which among the following steps is most likely to be taken at the time of an economic recession?

Answer: B. INCREASE IN EXPENDITURE ON PUBLIC PROJECTS is the most likely step during an economic recession. During an ECONOMIC RECESSION, aggregate demand falls, unemployment rises, and private investment contracts. The standard KEYNESIAN COUNTER-CYCLICAL POLICY response combines: - EXPANSIONARY FISCAL POLICY: increase government spending (public works, infrastructure projects), tax cuts. - EXPANSIONARY MONETARY POLICY: lower interest rates, cut CRR/SLR/repo rate to encourage borrowing and investment. INCREASING PUBLIC PROJECT SPENDING: - Creates jobs directly (construction, infrastructure). - Has a strong fiscal multiplier (each rupee of government spending generates more than one rupee of GDP via demand chains). - Boosts aggregate demand and inflates the economy out of recession. Why other options are WRONG: (A) Cut in taxes is correctly expansionary, BUT combining it with an INCREASE IN INTEREST RATE is CONTRADICTORY — high interest rates choke borrowing and investment, defeating the tax cut's stimulus. (C) Increase in taxes is CONTRACTIONARY (reduces disposable income and demand); pairing with low interest rates doesn't fix the bigger contractionary effect. Wrong direction for recession. (D) Reduction of expenditure during recession is the OPPOSITE of what is required — that would deepen the recession (this is the 'austerity' approach, criticised post-2008). The post-2008 global financial crisis and the post-COVID stimulus packages (worldwide) followed the option B approach. Source: NCERT Class 12 Macroeconomics Chapter on Government Budget / Keynesian fiscal policy.