Which of the following best illustrates the use of discretionary countercyclical fiscal policy?
A) Congress provides $90 billion in relief aid for hurricane victims.
B) Congress appropriates $50 billion to help the needy, and the appropriation is financed by a tax on wealth.
C) Income tax receipts are smaller because of a decline in real GDP during a recession.
D) Congress passes a bill authorizing $100 billion in additional spending when it receives news of a deepening recession.

Question

Quizplus · Accepted Answer

Discretionary countercyclical fiscal policy involves deliberate changes in government spending or taxation in response to economic conditions. Option D illustrates this by showing that Congress is authorizing additional spending in response to news of a deepening recession. Options A and B involve government spending, but they are not necessarily countercyclical or responding to economic conditions. Option C refers to automatic stabilizers, rather than discretionary policy.

Which of the Following Best Illustrates the Use of Discretionary