Discretionary fiscal policy

Question

Quizplus · Accepted Answer

Discretionary fiscal policy involves deliberate and intentional changes in government spending and/or taxation to influence the overall level of economic activity. Since the government is responsible for making these changes, it requires action by Parliament or some other legislative body to enact the necessary legislation. Therefore, option A is the correct choice. B is incorrect because discretionary fiscal policy can be triggered by a range of economic circumstances, not just poor economic performance. C is incorrect because discretionary fiscal policy can involve changes in both government outlays and revenues. D is incorrect because it suggests that discretionary fiscal policy can only involve changes in personal income tax rates, which is not the case. E is incorrect because discretionary fiscal policy can be used both in recessions and during expansions.

Discretionary Fiscal Policy