List two fiscal policy actions that could help the economy to recover faster from a downturn ?
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Two fiscal policy actions that could help the economy recover faster from a downturn are:
1. Increase Government Spending:
- In a downturn, the government can boost economic activity by increasing spending on public infrastructure projects, such as building or repairing roads, bridges, and public buildings. This injection of funds into the economy creates jobs, stimulates demand, and supports industries related to construction and infrastructure.
2. Tax Cuts:
- Implementing temporary tax cuts, especially for individuals and businesses, can stimulate consumer spending and business investment. When people have more disposable income due to lower taxes, they are likely to spend more, contributing to increased demand for goods and services. Similarly, businesses may use tax savings to invest in expansion or hire additional employees, further supporting economic recovery.
Both of these fiscal policy measures aim to increase aggregate demand in the economy, which is crucial during a downturn to counteract the decline in consumer and business spending.