Consider the following actions by the Government: 1. Cutting the tax rates 2. Increasing the government spending 3. Abolishing the subsidies In the context of economic recession, which of the above actions can be considered a part of the “fiscal stimulus” package?

A fiscal stimulus is a set of measures taken by the government to boost economic growth, especially during a recession. The goal is to increase the total demand in the economy by putting more money into the hands of consumers and businesses.

1. Cutting tax rates increases the disposable income of individuals and the profits of companies. This encourages spending and investment, which stimulates the economy.

2. Increasing government spending directly injects money into the economy through infrastructure projects, social schemes, and public services. This creates jobs and generates demand for goods and services.

3. Abolishing subsidies is a contractionary measure. It reduces government expenditure and increases the cost of goods for consumers, which takes money out of the economy. Therefore, it is not part of a stimulus package.

Since only actions 1 and 2 help in expanding economic activity during a recession, the correct answer is A.