ECONOMICS
FISCAL POLICY
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The government cuts spending
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Taxes are increased on individuals
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Unemployment benefits
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Higher interest rates
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All of the answers
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Detailed explanation-1: -Nondiscretionary fiscal policy consists of policies that are built into the system so that an expansionary or contractionary stimulus can be given automatically. Unemployment insurance, the progressive income tax, and welfare serve as the built-in policies.
Detailed explanation-2: -a tax decrease passed into law by Congress is an example of a discretionary fiscal policy used to correct a recessionary gap.
Detailed explanation-3: -On the contrary, non-discretionary fiscal policy can be defined as a fiscal policy that arises from the government’s design to spend and change taxes. There are no government official activities that determine changes in this policy.
Detailed explanation-4: -There are three types of fiscal policy which are – neutral, contractionary, and expansionary.