Discretionary fiscal policy is so named because it
A)is undertaken at the order of the nation's central bank.
B)occurs automatically as the nation's level of GDP changes.
C)involves specific changes in taxes and government spending undertaken by Congress and the president.
D)involves secret advice given by the Council of Economic Advisers to the president.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy involves deliberate changes in government spending and taxes undertaken by Congress and the president to stabilize the economy. It is discretionary because it is not automatic but is the result of conscious policy decisions made by policymakers. Option A is incorrect because discretionary fiscal policy is not controlled by the central bank but by the government. Option B is incorrect because automatic stabilizers, not discretionary fiscal policy, respond automatically to changes in the level of GDP. Finally, option D is incorrect because discretionary fiscal policy is a public and transparent process, and the Council of Economic Advisers provides advice but does not make secret decisions.

Discretionary Fiscal Policy Is So Named Because It