ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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expansionary and discretionary
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expansionary and automatic
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contractionary and discretionary
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contractionary and automatic
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Detailed explanation-1: -Automatic stabilizers respond immediately to an economic fluctuation. On the other hand, the discretionary policy takes a long period for the implementation of the policy and the effects to be felt in an economy.
Detailed explanation-2: -The two major examples of expansionary fiscal policy are tax cuts and increased government spending.
Detailed explanation-3: -Increasing spending and cutting taxes to produce budget deficits means that the government is putting more money into the economy than it is taking out. Expansionary fiscal policy includes tax cuts, transfer payments, rebates and increased government spending on projects such as infrastructure improvements.
Detailed explanation-4: -Discretionary fiscal policy and automatic stabilizers are frequently confused with each other. If a government has to take any action to make it happen, it is discretionary fiscal policy. If it is something that happens on its own, it is an automatic stabilizer.