In macroeconomic policy, pump priming is a measure that should typically be used during which phase of the economy to stimulate demand?

Introduction / Context:
Pump priming is a concept from macroeconomics and public finance associated with the use of government spending to revive a sluggish economy. The expression is borrowed from the idea of pouring a little water into a pump to start the flow. In economic terms, it refers to injecting extra expenditure when economic activity is low. The question asks during which phase such a measure is most appropriate.

Given Data / Assumptions:

• The tool mentioned is pump priming, meaning increased government expenditure to stimulate demand.
• Options include inflation, deflation, stagflation and reflation.
• We assume standard textbook meanings of these phases.

Concept / Approach:
Deflation refers to a period of falling general price levels, usually accompanied by reduced demand, low investment and high unemployment. In such times, private sector spending is weak, so governments may increase their spending deliberately to boost aggregate demand. This policy action is called pump priming. Under inflation, where prices are already rising too fast, such additional spending would worsen the problem, so pump priming is not suitable.

Step-by-Step Solution:
Step 1: Define pump priming as deliberate government spending to stimulate aggregate demand.Step 2: Identify deflation as a situation of falling prices and weak demand.Step 3: Recognise that in deflation the main policy aim is to increase spending and investment.Step 4: Note that pump priming fits this aim by putting money into the economy through public works and similar projects.Step 5: Conclude that pump priming should be resorted to during deflation.

Verification / Alternative Check:
Classical descriptions of Keynesian fiscal policy describe pump priming as increased public expenditure during downturns or depressions. Deflationary periods are characterised by low output and unemployment, which match those downturn conditions. Standard exam guides also directly associate pump priming with overcoming deflation or depression, never with a boom or high inflation phase, which confirms this choice.

Why Other Options Are Wrong:
During inflation, the challenge is too much demand chasing limited supply, so an expansionary measure like pump priming would be counterproductive. Stagflation combines stagnation with inflation and requires more careful and mixed policy tools rather than simple expansion. Reflation is a policy objective of bringing an economy back from recession using various tools, and pump priming can be part of that, but the phase that clearly needs such stimulus due to low prices and weak demand is deflation, making option B the most accurate choice.

Common Pitfalls:
Students may confuse deflation with disinflation or think that any slowdown is stagflation. Another common error is to pick reflation mainly because it sounds similar to reflection or recovery without recalling its precise meaning. For questions about pump priming, always connect the idea of starting or restarting economic activity with a depressed or deflationary environment where government must step in to boost demand.

Final Answer:
Pump priming is most appropriately used during a deflationary phase to stimulate demand and revive economic activity.