Discretionary fiscal policy
A) is not very effective in influencing real GDP during normal times because of time lags.
B) can be very effective in influencing real GDP during abnormal times, such as when a nation is at war.
C) may reassure investors and consumers that the federal government will be able to avert a major economic downturn.
D) all of the above.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy refers to changes in government spending and taxation that are implemented by policymakers with the intention of stabilizing the economy. However, the effectiveness of discretionary fiscal policy can depend on the timing of the policy implementation, as there can be significant time lags between when the policy is enacted and when it has an impact on the economy. During abnormal times, such as during a war, discretionary fiscal policy can be very effective in influencing real GDP. Additionally, the announcement of discretionary fiscal policy measures may help reassure investors and consumers that the government is taking steps to avert a major economic downturn.

Discretionary Fiscal Policy