ʺEuropean Economic Recovery Planʺ
ʺThe European Commission urged EU governments to jointly combat the economic slowdown with 200 billion euros $256 billion) in spending and tax cuts to boost growth and consumer and business confidence.ʺ The plan ʺ...would see the 27 EU governments spend 1.5 percent of the blocʹs gross domestic product to halt the slowdown that has already pushed some European nations into recession.
Which of the following describe the EUʹs plan?
i. It is discretionary fiscal policy
ii. It will generate a cyclical surplus.

Question

Quizplus · Accepted Answer

The plan is discretionary fiscal policy, as it involves government spending and tax cuts to boost growth and confidence. It is not expected to generate a cyclical surplus, as its goal is to combat a slowdown and prevent recessions.