The economy is in a recession and the recessionary gap is large.Discretionary fiscal policy that might occur is ________.Automatic fiscal policy that might occur is ________.A discretionary fiscal stimulation package that would avoid a budget deficit is a simultaneous and equal ________.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy involves deliberate actions by the government, such as increasing government expenditure and cutting taxes to stimulate the economy. Automatic fiscal policy refers to built-in stabilizers like increased transfer payments and reduced taxes that occur without new legislation. A discretionary fiscal package that avoids a budget deficit would involve increasing both government expenditure and taxes equally.

The Economy Is in a Recession and the Recessionary Gap