Fiscal policy is a key tool of macroeconomic policy, and consists of government spending and tax policy. b) taxpayers receive a $1500 per family rebate. B. A discretionary fiscal policy is the level of legislative parameters which are used as action policies for providing stimulus for the effect of control of economic recession. 15. The following article will update you about the difference between discretionary and automatic fiscal policy. Expansionary fiscal policy works fast if done correctly. First to increase the taxes with the increase in income of consumer and decrease the spending. Choose all that apply. Which of the following fiscal policy actions would be appropriate if the economy is experiencing an recessionary gap? Increased government spending b. As the economy expands, welfare spending will tend to fall since the economy will be generating more income and moving people off the welfare rolls. All other trademarks and copyrights are the property of their respective owners. Question 1.1. Fiscal policy tries to nudge the economy in different ways through either expansionary or contractionary policy, which try to either increase economic growth through taxes and spending or … Sciences, Culinary Arts and Personal For each of the following scenarios, indicate whether it represents an automatic (A) or discretionary (D) stabilizer, and whether it is an example of expansionary (E) or contractionary (C) fiscal policy. The two major examples of expansionary fiscal policy are tax cuts and increased government spending. It also focuses on expanding or contracting the economy according to the needs. Which of the following is an example of discretionary fiscal policy? Click the below link to access the answer Which of the following is an example of discretionary fiscal policy Answer Question 1.1. c) Fed lowers the interest rate by increasing the money supply. Fiscal policy is the policy under which the government of a country uses fiscal measures (or instruments) to correct excess demand and deficient demand and to achieve other desirable objectives. answer! As a result, politicians who use contractionary policy are soon voted out of … & Discretionary fiscal policy refers to changes in:... 1.Discretionary fiscal policy works to close a... What is the income net of taxes called? Discretionary fiscal policy differs from automatic fiscal stabilizers. Discretionary Fiscal Policy: . Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals. A state government borrows money to finance the building of a new bridge. Which of the following is an example of a discretionary fiscal policy that could be used to return the economy to full-employment REAL GDP? And c. Therefore, fiscal policy in under-developed countries has a different objective to that of advanced countries. © copyright 2003-2020 Study.com. Which Of The Following Are Examples Of Discretionary Fiscal Policy? Taxes. Expansionary fiscal policy can help to end recessions and contractionary fiscal policy can help to reduce inflation. They rely on tax cuts and deregulation. (multiple Answers) Food Stamp Payments Rise When The Economy Is In A Recession Congress Passes A Law That Raises Income Tax Rates. Discretionary fiscal policy uses two tools. Discretionary fiscal policy represents changes in government spending and taxation that need specific approval from Congress and the President. Answers: An increase in the number of unemployment benefit payments during a recession due to rising unemployment. Give reasons to support your answer. Which of the following is an example of discretionary fiscal policy? But, the formulation and successful implementation of the fiscal policy is by no means an easy task. All rights reserved. The first tool is the discretionary portion of the U.S. budget. Which of the following is an example of discretionary fiscal policy? Check all that apply. discretionary monetary policy. Price stability b) Congress votes to fund a new jobs program designed to put unemployed workers to work. Selected Answer: An increase in the number of unemployment benefit payments during a recession due to rising unemployment. For example, subsidies to ... One important set of measures has related to discretionary fiscal policy as both taxes and public spending have been adjusted. "Discretionary spending is what the President and the Congress decide to spend through annual appropriations bills. Question: Which Of The Following Are Examples Of Discretionary Fiscal Policy (as Opposed To Automatic Stabilizers)? a. The distinction between discretionary fiscal policy and the use of automatic stabilizers is that _____ automatic stabilizers, once adopted, are built into the structure of the economy. Taxation: Taxation is a powerful instrument of fiscal policy in the hands of public authorities which greatly effect the changes in disposable income, consumption and investment. Tax cuts can put money into the hands of consumers if the government can send out … The federal government increases spending on rebuilding the New Jersey shore following a hurricane. Question 3 Which of the following is an example of discretionary fiscal policy? Discretion.   For example, the Works Progress Administration put 8.5 million people to work. adjustment of government spending and taxes in order to achieve certain national economic goals. a. Governments use fiscal policy to try and manage the wider economy. If an expansionary fiscal policy also causes higher interest rates, then firms and households are discouraged from borrowing and spending (as occurs with tight monetary policy), thus reducing aggregate demand. Fiscal Policy: Fiscal policy refers to the governments use of taxes and spending to influence the overall level of aggregate demand in the economy and promote the macroeconomic objectives. The automatic stabilizers in the economy inhibited the use of discretionary fiscal policy. An increase in corporate tax collection during an expansion because of more sales. B. Discretionary fiscal policy is so named because... State true or false and justify your answer:... State true or false and justify your answer: The... What is fiscal policy? ... as the following feature demonstrates. The second action is government spending. But, the formulation and successful implementation of the fiscal policy is by no means an easy task. There are mainly three types of fiscal measures, viz. Determine whether each of the following is an example of a discretionary fiscal policy action. When the governmen… B) An increase in income tax receipts during an expansion because incomes are rising. That's because voters don't like tax increases. discretionary fiscal policy. Which of the following is an example of discretionary fiscal policy? Become a Study.com member to unlock this Which of the following is an example of a discretionary fiscal policy action? A discretionary fiscal policy refers to a policy of the government which aims to change the spending or taxes of the government. The Federal Reserve sells Treasury securities. balanced budget operations. (Check all that apply.) Typically, the idea behind this type of policy is to deliberately impact that trend, gradually moving the economy in a direction that is esteemed by government leadership as more beneficial to the jurisdiction. Policy Lags: During the recent times, there is not much argument about the desirability or otherwise of a discretionary fiscal policy. Which of the following are examples of discretionary fiscal policy? Question 1.1. Expansionary Fiscal Policy There are two types of fiscal policy. Examples include increases in spending on roads, bridges, stadiums, and other public works. Because discretionary fiscal policy is subject to the lags discussed in the last section, its effectiveness is often criticized. A reduction in spending on new road construction A rise in spending to prevent coastal erosion A tax cut A tax increase Points: Two tools for recession, decrease in taxes when the income of consumer decreases and increase in spending. | Which of the following is an example of discretionary fiscal policy Answer. Higher taxes or lower government expenditure is called contractionary policy. (v) This policy is a prolonged lag which in practice has a disturbing effect on the economy. All of the following are examples of fiscal policy, EXCEPT when the: Question 1 options: a) U.S. Congress approves an economic stimulus package. Privacy The government spends more on the military to provide assistance to England after a natural disaster. Discretionary fiscal policy refers to the changes in taxes and transfers that occur as GDP changes. Which of the following is an example of a discretionary fiscal policy? The following are the major limitations of the discretionary fiscal policy… View desktop site. (Check ail that apply), A) The government provides stimulus funds to repair roads and bridges to increase spending in the economy, B) Additional taxes are collected as the economy experiences an increase in income resulting from economic, C) Congress provides a tax rebate to encourage additional spending in order to reduce the unemployment rate, D) The president and Congress reduce tax rates to increase the amount of investment spending, E) The government spends more on the military to provide assistance to England after a natural disaster, F) A state government borrows money to finance the building of a new bridge. Fiscal policy refers to the . As the economy expands, tax revenue tends to rise since more income exists to be taxed. Chapter 30: Fiscal Policy. The central government exercises discre­tionary fiscal policy when it identifies an unemployment or inflation problem, esta­blishes a policy objective concerning that problem, and then deliberately adjusts taxes and/or spending accordingly. A discretionary fiscal policy is a monetary policy that is created and initiated by a government entity as a means of dealing with events and trends that are taking place in the economy. One example of an automatically countercyclical fiscal policy is progressive taxation. © 2003-2020 Chegg Inc. All rights reserved. The two major examples of expansionary fiscal policy are tax cuts and increased government spending. The government provides stimulus funds to repair roads and bridges to increase spending in the economy. Effects of discretionary fiscal policy Suppose the economy had been producing at potential GDP but now is producing above it. One example of how discretionary fiscal policy functions is to consider a nation that is entering into a period of economic recession. Fiscal Policy. Discretionary fiscal policy is independent of Congress and based on the progressivity of the tax system. A problem arises here. Examples include increases in spending on roads, bridges, stadiums, and other public works. Which one of the following statements about discretionary fiscal policy is correct? Which of the following are examples of fiscal policy? Discretionary fiscal policy is a demand-side policy that uses government spending and taxation policy to influence aggregate demand. Reserve Requirement. incom They agree the government has a role to play, but fiscal policy should target companies. 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