Suppose that a state legislature votes to increase spending because of an unexpected recession.This is an example of which of the following?

Question

Quizplus · Accepted Answer

Discretionary stabilization refers to a deliberate government action to stabilize the economy. In this scenario, the state legislature is making a decision to increase spending with the goal of countering the effects of an unexpected recession, which means they are taking discretionary action to stabilize the economy. Dynamic scoring of a policy refers to a method of analyzing the economic effects of a proposed policy, and is not relevant to this scenario. Capital accounting refers to the process of recording and reporting the financial assets and liabilities of a business or government, and is also not relevant to this scenario. Automatic stabilization refers to built-in mechanisms in the economy that automatically work to stabilize it, such as changes in incomes, tax revenues, and government spending that occur automatically in response to economic activity. While government spending can be part of automatic stabilization, the fact that the state legislature is making a deliberate decision to increase spending means this is not an example of automatic stabilization.

Suppose That a State Legislature Votes to Increase Spending Because