UPSC Prelims 2021— Question 93

During recession, governments generally use counter-cyclical fiscal policy to support aggregate demand, including increased public expenditure and, where appropriate, tax reductions. Increasing taxes while reducing interest rates is not the standard combined response, and cutting taxes while raising interest rates is internally contractionary. Therefore increased expenditure on public projects is the appropriate option. The final answer-key position for Set C identifies option B as the correct option. Option A — Cut in tax rates accompanied by increase in interest rate — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. Option B — Increase in expenditure on public projects — is correct because it is the alternative that matches the constitutional, historical, geographical, scientific or economic principle established above. Option C — Increase in tax rates accompanied by reduction of interest rate — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. Option D — Reduction of expenditure on public projects — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. For PYQ interpretation, the distinction between the correct alternative and merely related facts is important. UPSC often places plausible distractors beside the precise statement that matches the underlying rule, chronology, definition or empirical relationship. The answer should therefore be read against the exact wording of the question rather than against a broadly related fact.