Q. Consider the following statements:

1. During recession, counter-cyclical fiscal policy aims at raising taxes.
2. Pro-cyclical fiscal policy hampers growth.

Which of the above statements is/are correct?
Answer: Only 2
Notes: Counter-cyclical fiscal policy involves reducing taxes and increasing government expenditure during recessions to boost demand, not raising taxes. Pro-cyclical fiscal policy amplifies economic fluctuations and can negatively impact growth by increasing volatility and reducing investment. Therefore, only statement 2 is correct, while statement 1 is incorrect.