Discretionary fiscal policy refers to changes in:
A)interest rates.
B)the money supply.
C)government spending or taxes to close a recessionary or inflationary gap.
D)taxes to account for externalities and control pollution.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy refers to deliberate changes in government spending or taxation designed to close a recessionary or inflationary gap. It involves the actions taken by policymakers to influence the economy's level of activity, such as increasing government spending and/or reducing taxes during a recession to stimulate economic growth or decreasing government spending and/or raising taxes during an economic boom to combat inflation. Discretionary fiscal policy is distinct from automatic stabilizers, such as unemployment insurance or progressive taxation, which naturally stabilize economic activity without any need for legislative action.

Discretionary Fiscal Policy Refers to Changes In