Discretionary fiscal policy will stabilize the economy most when:

Question

Quizplus · Accepted Answer

Discretionary fiscal policy involves using government spending and taxation to influence the economy. Deficits, or government spending exceeding revenues, can stimulate the economy during recessions by increasing demand and creating jobs. Surpluses, or government revenues exceeding spending, can help control inflation by reducing demand. Therefore, it is most effective to incur deficits during recessions and surpluses during inflations for maximum stabilization of the economy.

Discretionary Fiscal Policy Will Stabilize the Economy Most When