During a recession, what must happen to interest rates to spur economic growth? a) drop b) increase c) remain stable d) increase and decrease

A). Drop.

Explanation:

Controlling the interest rates is one of the vital element of government's fiscal policy that it applies to stabilize the economy during recession or inflation.

As per the question, the economic rates must be 'dropped or lowered' during a recession in order to increase the supply/flow of money in the market that would comprehend higher disposable income and improved economic activities that would assist in bringing the economy to the equilibrium.

What actually happens during a recession is that due to increased tax rates people are left with no or very little money to spend due to lack of work and economic activities that leads the economy towards recession. In order to control this, the government lowers tax rate(as a part of its fiscal policy) to increase investment and work opportunities for people that would comprehend the flow of money in the market and stabilize the economy. Thus, option A is the correct answer.

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