Economics · Economy
Consider the following statements: Statement I: A deliberate reduction in government expenditure, holding taxation constant, constitutes a contractionary fiscal stance. Statement II: Such a fiscal stance may be adopted in situations of excess aggregate demand to moderate inflationary pressures and stabilise public debt dynamics. Which one of the following is correct with respect to the above statements?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both Statement I and Statement II are correct and Statement II is the correct explanation of Statement I.✓
- 2Both Statement I and Statement II are correct but Statement II is not the correct explanation of Statement I.
- 3Statement I is correct but Statement II is incorrect.
- 4Statement I is incorrect but Statement II is correct.
Correct answer
Both Statement I and Statement II are correct and Statement II is the correct explanation of Statement I.
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