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Question

Which of the following are correct in regard to the austerity measures taken by a country going through adverse economy conditions:

(1) These measures include a reduction in spending.

(2) These measures include an increase in tax

(3) These measures include reduction in budget deficit.

Select the correct answer using the codes given below :

A 1 and 2 only Correct Answer Incorrect Answer
B 1 and 3 only Correct Answer Incorrect Answer
C 2 and 3 only Correct Answer Incorrect Answer
D 1, 2 and 3 Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Austerity describes policies used by governments to reduce budget deficits during adverse economic conditions. These  policies may include spending cuts, tax increases. This is done in economic crisis situation to improve the credit rating of the countries going through adverse economic condition.

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