Discretionary fiscal policy entails:
A)changing the money supply to influence interest rates and investment spending.
B)using government spending or tax policy to affect aggregate demand.
C)lifting trade barriers on imports.
D)setting policy to raise the natural rate of unemployment.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy involves using government spending and tax policy to influence aggregate demand. By increasing government spending or cutting taxes, policymakers can stimulate demand and boost economic growth. Conversely, reducing government spending or raising taxes can slow down economic activity and combat inflation. The other choices are not examples of discretionary fiscal policy.

Discretionary Fiscal Policy Entails