ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Discretionary Fiscal Policy: government spending and tax changes enacted at the time of the problem to alter the economy. Nondiscretionary Fiscal Policy: that set of policies that are built into the system to stabilize the economy (sometimes called automatic stabilizers)

Detailed explanation-2: -The correct answer is Interest Rate. Interest Rate does not form part of the fiscal policy of a country. Fiscal policy is the use of government revenue collection (mainly taxes but also non-tax revenues such as divestment, loans) and expenditure (spending) to influence the economy.

Detailed explanation-3: -Too much stimulus leads to inflation. Too much contraction leads to recession. So the question of how much stimulus or contraction is always important and difficult to determine in advance. Crowding out, sometimes but not always, reduces the effectiveness of fiscal policy.