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

Explanation

Increase in expenditure on public projects: This is one of the tools to stimulate the economy during a recession, as it triggers a virtuous cycle of investment, leading to an increase in GDP (production of goods and services) and income in the economy. This, in turn, increases demand, completing the virtuous cycle. Increase in tax rates accompanied by a reduction of interest rates: Increasing tax rates is not desirable during a recession as income is falling in the economy. Reduction of expenditure on public projects: This is not desirable during a recession as it leads to less government expenditure, thereby not contributing significantly to output. Hence, option (b) is the correct answer.