The distinction between discretionary fiscal policy and the use of automatic stabilizers is that
A) only discretionary fiscal policy can stimulate the economy.
B) only automatic stabilizers can stimulate the economy.
C) discretionary fiscal policy, once adopted, is built into the structure of the economy.
D) automatic stabilizers, once adopted, are built into the structure of the economy.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy involves deliberate government action in the form of changes to government spending and/or taxation to stabilize the economy. It is not built into the structure of the economy and requires a conscious decision by policymakers to undertake it. On the other hand, automatic stabilizers are features of the economy that automatically help stabilize output and employment without explicit government action. Examples of automatic stabilizers include progressive income taxes, unemployment benefits, and corporate profits taxes. Once adopted, they are built into the structure of the economy and operate automatically in response to changes in economic conditions. Therefore, the best answer is D.

The Distinction Between Discretionary Fiscal Policy and the Use of Automatic