Discretionary fiscal policy refers to:
A)any change in government spending or taxes which destabilizes the economy.
B)the authority which Parliament has to change personal income tax rates.
C)changes in taxes and government expenditures made by Parliament to stabilize the economy.
D)the changes in taxes and transfers which occur as GDP changes.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy refers to deliberate changes in government spending or taxes made by Parliament to stabilize the economy. This is different from automatic stabilizers, such as changes in taxes and transfers that occur as GDP changes, which are not by design but still have stabilizing effects on the economy. Choice A is incorrect because discretionary fiscal policy is intended to stabilize the economy, not destabilize it. Choice B is incorrect because personal income tax rates are just one type of tax and discretionary fiscal policy includes changes in all types of taxes and government expenditures.

Discretionary Fiscal Policy Refers To