Which of the following best illustrates the use of discretionary fiscal policy?
A)Congress providing $1 billion in relief aid for hurricane victims
B)Congress appropriating $400 million to help the needy and the appropriation being financed by a tax on wealth
C)Income tax receipts being smaller because of a decline in real GDP during a recession
D)The Federal Reserve tightening credit when it receives news of accelerating inflation
E)Congress passing a bill authorizing $2 billion in additional spending when it receives news of a deepening recession

Question

Quizplus · Accepted Answer

Discretionary fiscal policy involves intentional changes in government spending and taxation in order to achieve a specific economic outcome. Congress passing a bill authorizing $2 billion in additional spending when it receives news of a deepening recession is an example of discretionary fiscal policy because it involves intentional government action to increase spending in response to a recession. The other choices may involve government spending or taxation, but do not necessarily involve intentional discretionary fiscal policy.

Which of the Following Best Illustrates the Use of Discretionary