If consumption decreases, the existence of the government spending multiplier effect means that in order to counter the recession

Question

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If consumption decreases, this leads to a decrease in aggregate demand in the economy, which can cause a recession. To counter this, the government can use fiscal policy, which involves either increasing government spending or decreasing taxes. However, if consumption is already decreasing, increasing government spending may not be feasible as it may lead to a further increase in inflation. Therefore, the government can use a combination of tax cuts and increases in fiscal policy, but the increase in fiscal policy needs to be less than the decrease in consumption in order to counter the recession effectively. Option C correctly describes this situation.

If Consumption Decreases, the Existence of the Government Spending Multiplier