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GS Paper IUPSC Prelims 2021
Banking & Financial System
Question No. 109Interactive Test Mode
00:00
+2-0.66

Q109. Which of the following steps is most likely to be taken at the time of an economic recession?

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

Select the correct option below (or cross out options to eliminate)
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Official Answer Key & Detailed Solution

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Official UPSC Answer KeyUPSC Prelims 2021 • Indian Economy

Correct Answer: Option (B) — Increase in expenditure on public projects

Concept & Option Breakdown

Standard Reference Verified
  • Option (b) is correct: During a recession, private demand and investment decline. Keynesian counter-cyclical fiscal policy advocates for an increase in government capital expenditure on public projects to crowd-in private investment, create employment, stimulate aggregate demand, and drive economic recovery.
Elimination Heuristic & Exam Approach

Counter-cyclical policy: In a downturn, the public sector must inject liquidity. Raising rates or cutting public expenditure tightens the contraction, so expansionary public spending (Option B) is the standard remedy.

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Question Specifications & Syllabus Mapping

Examination & YearUPSC Civil Services Preliminary Examination 2021 (Q109)
Paper & Marking SchemeGS Paper I • 2 Marks (-0.66 Negative for incorrect response)
Syllabus Subject & TopicIndian Economy → Banking & Financial System
Official Answer KeyOption (B) — Increase in expenditure on public projects

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Frequently Asked Questions — UPSC Prelims 2021 Q109

What is the official answer for UPSC Prelims 2021 GS Paper I Question 109 (Indian Economy)?

The official UPSC answer key for this 2021 Indian Economy (Banking & Financial System) question is Option (B): "Increase in expenditure on public projects". Correct attempts carry 2 Marks with -0.66 Negative penalty for wrong answers.

Which UPSC Prelims syllabus topic does this 2021 question belong to?

This question belongs to GS Paper I under the subject "Indian Economy" and micro-topic "Banking & Financial System". You can explore all repeated questions from Banking & Financial System in Acme AI's 3D Prelims PYQ Realm or practice 50 full-length and sectional tests in the APT Prelims Test Series.

How can I solve this Banking & Financial System UPSC Prelims question using option elimination?

Countercyclical policy: In a downturn, the public sector must inject liquidity. Raising rates or cutting public expenditure tightens the contraction, so expansionary public spending (Option B) is the standard remedy.

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Previous QuestionWhich one of the following is likely to be the most inflationary in its effects?
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