What does Discretionary fiscal policy mean?
October 28, 2008
pantherbaseball14 asked:
I know its changes made by the president and Congress, but I was wondering if anyone had a better definition. also, its opisite, Automatic Stabilizers, what does this mean?
I know its changes made by the president and Congress, but I was wondering if anyone had a better definition. also, its opisite, Automatic Stabilizers, what does this mean?
October 29th, 2008 at 8:18 pm
discretionary fiscal policies are policies decided AFTER economic reports are provided to the president and congress…
so, the president and congress WAITS until they know whether the economy is in a recession or in a boom…
Automatic stabilizers are either induced taxes or employment benefits. Inducted taxes are where a certain percentage of income is going to be taxed.
for example, if economy is in a boom, then there is more income. more income leads to higher taxes, and this higher taxes would reduce the economy’s tendency to overheat and result in high inflation rate.
similarly, if economy is in a recession, there are many unemployed, so government would be entitled to provide more unemployment benefits (i.e. cash), and economy will have more money and reduce impact of the recession “automatically”…
November 1st, 2008 at 4:13 pm
My economics book says that
Discretionary fiscal policy is The deliberate manipulation of government purchases, taxation, and transfer payments to promote macroeconomic goals, such as full employment, price stability and economic growth.
as for Automatic stabilizers they are Structural features of government spending and taxation that reduce fluctuations in disposable income and thus consumption over the business cycle.