Which of the following best illustrates the use of discretionary fiscal policy?
A)Congress provides $1 billion in relief aid for hurricane victims.
B)Congress appropriates $500 million 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)The Federal Reserve tightens credit when it receives news of accelerating inflation.
E)Congress passes a bill authorizing $2 billion in additional spending when it receives news of a deepening recession.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy refers to intentional changes in government spending and taxation in order to stabilize the economy. Choice E best illustrates the use of discretionary fiscal policy as Congress passes a bill authorizing additional spending in response to a deepening recession. The other options do not involve intentional changes in government spending or taxation for stabilizing the economy.

Which of the Following Best Illustrates the Use of Discretionary