Discretionary fiscal policy refers to:
A) Monetary policy.
B) Deliberate changes in government regulation.
C) Automatic changes in taxes and spending because of the business cycle.
D) Changes in spending and revenue items because of new legislation.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy refers to deliberate changes in government spending and tax policies as a response to economic conditions, which are enacted through new legislation. Therefore, the best choice is D. Monetary policy (A) refers to actions taken by the central bank to control the money supply and inflation. Automatic changes in taxes and spending because of the business cycle (C) refer to automatic stabilizers, which operate without the need for new legislation. Deliberate changes in government regulation (B) refer to changes in the rules and guidelines that govern the behavior of businesses and individuals, rather than changes in fiscal policy.

Discretionary Fiscal Policy Refers To