which of the following are examples of discretionary fiscal policy

which of the following are examples of discretionary fiscal policy

As the economy expands, tax revenue tends to rise since more income exists to be taxed. a. Which of the following are examples of discretionary fiscal policy? Expansionary Fiscal Policy There are two types of fiscal policy. OAn increase in total unemployment benefit payments during a recession due to rising unemployment. Fiscal policy is the policy under which the government of a country uses fiscal measures (or instruments) to correct excess demand and deficient demand and to achieve other desirable objectives. Fiscal policy refers to the . For all these reasons, discretionary fiscal and monetary policy is as much an art as a science. A. The burning question in this context is related with the timing of the fiscal measures. Therefore, fiscal policy in under-developed countries has a different objective to that of advanced countries. The president and Congress reduce tax rates to increase the amount of investment spending. Sciences, Culinary Arts and Personal C) … a tax cut passed by Congress to fight a recessionb. Which of the following are discretionary fiscal policies that could bring the economy closer to potential GDP? Get the detailed answer: Which of the following is an example of a discretionary fiscal policy?a. Fiscal Policy: Fiscal policy refers to the governments use of taxes and spending to influence the overall level of aggregate demand in the economy and promote the macroeconomic objectives. Generally, it is believed that the discretionary fiscal policy is a very effective tool that the government can use for the stabilization of the economy. They agree the government has a role to play, but fiscal policy should target companies. Fiscal policy is important as it affects the amount of income consumers are able to take home. Reserve Requirement. Full employment. Discretionary Fiscal Policy: The government uses fiscal and monetary policies to regulate economic growth. Determine whether each of the following is an example of a discretionary fiscal policy action. The following are the major limitations of the discretionary fiscal policy: Question: Which Of The Following Are Examples Of Discretionary Fiscal Policy (as Opposed To Automatic Stabilizers)? (Check ail that apply), A) The government provides stimulus funds to repair roads and bridges to increase spending in the economy, B) Additional taxes are collected as the economy experiences an increase in income resulting from economic, C) Congress provides a tax rebate to encourage additional spending in order to reduce the unemployment rate, D) The president and Congress reduce tax rates to increase the amount of investment spending, E) The government spends more on the military to provide assistance to England after a natural disaster, F) A state government borrows money to finance the building of a new bridge. Terms Discretionary fiscal policy refers to changes in:... 1.Discretionary fiscal policy works to close a... What is the income net of taxes called? Both of these policies are intended to increase aggregate demand while contributing to … Temporary and Permanent Fiscal Policy. 1. Tax cuts can put money into the hands of consumers if the government can send out … Discretionary fiscal policy is so named because... State true or false and justify your answer:... State true or false and justify your answer: The... What is fiscal policy? It can be achieved t view the full answer. Additional taxes are collected as the economy experiences an increase in income resulting from economic growth. For example, stimulating a stagnant economy by increasing spending or lowering taxes, also known as expansionary fiscal policy, runs the risk of causing inflation to rise. The federal government increases spending on rebuilding the New Jersey shore following a hurricane. (Check All That Apply.) Answers: An increase in the number of unemployment benefit payments during a recession due to rising unemployment. As the economy expands, welfare spending will tend to fall since the economy will be generating more income and moving people off the welfare rolls. Generally, it is believed that the discretionary fiscal policy is a very effective tool that the government can use for the stabilization of the economy. ... as the following feature demonstrates. The first is taxation. One example of how discretionary fiscal policy functions is to consider a nation that is entering into a period of economic recession. Give reasons to support your answer.   Proponents of trickle-down economics say that all fiscal policy should benefit the wealthy. Fiscal Policy: Fiscal policy refers to the governments use of taxes and spending to influence the overall level of aggregate demand in the economy and promote the macroeconomic objectives. Selected Answer: An increase in the number of unemployment benefit payments during a recession due to rising unemployment. A decrease in total unemployment benefit payments during an expansion due to decreasing unemployment. Answered: The advantage of automatic stabilizers… | bartleby . The government provides stimulus funds to repair roads and bridges to increase spending in the economy. All other trademarks and copyrights are the property of their respective owners. Increased government spending b. Fiscal policy is a policy adopted by the government of a country required in order to control the finances and revenue of that country which includes various taxes on goods, services and person i.e., revenue collection, which eventually affects spending levels and hence for this fiscal policy is termed as sister policy of monetary policy. One example of an automatically countercyclical fiscal policy is progressive taxation. A discretionary fiscal policy refers to a policy of the government which aims to change the spending or taxes of the government. "Discretionary spending is what the President and the Congress decide to spend through annual appropriations bills. An increase in corporate tax collection during an expansion because of more sales. Which one of the following statements about discretionary fiscal policy is correct? Which Of The Following Are Examples Of Discretionary Fiscal Policy? Which of the following are examples of discretionary fiscal policy? Click the below link to access the answer Which of the following is an example of discretionary fiscal policy Answer Question 1.1. So if the govern… A discretionary fiscal policy is the level of legislative parameters which are used as action policies for providing stimulus for the effect of control of economic recession. Discretionary fiscal policy represents changes in government spending and taxation that need specific approval from Congress and the President. Generally following are the objectives of a fiscal policy in a developing economy: 1. An increase in income tax receipts during an expansion …   For example, the Works Progress Administration put 8.5 million people to work. a. Governments use fiscal policy to try and manage the wider economy. Changing tax rates or the level of government purchases are examples of discretionary fiscal policy. There are mainly three types of fiscal measures, viz. Choose all that apply. According to the options given above, the examples related to the discretionary fiscal policy are: A) The government provides stimulus funds to... Our experts can answer your tough homework and study questions. By increasing or reducing taxes and spending, governments look to increase or decrease the velocity of money, which can have an effect on inflation and consumer spending. Which of the following fiscal policy actions would be appropriate if the economy is experiencing an recessionary gap? Which of the following is an example of discretionary fiscal policy? An expansionary fiscal policy, with tax cuts or spending increases, is intended to increase aggregate demand. A 'countercyclical' fiscal policy takes the opposite approach: ... Keynesian economics advocates the use of automatic and discretionary countercyclical policies to lessen the impact of the business cycle. Taxes. Taxation: Taxation is a powerful instrument of fiscal policy in the hands of public authorities which greatly effect the changes in disposable income, consumption and investment. The most widely-used is expansionary, which stimulates economic growth. Additional taxes are collected as the economy experiences an increase in income resulting from economic growth. The two major examples of expansionary fiscal policy are tax cuts and increased government spending. Typically, the idea behind this type of policy is to deliberately impact that trend, gradually moving the economy in a direction that is esteemed by government leadership as more beneficial to the jurisdiction. Fiscal policy, measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures. Earn Transferable Credit & Get your Degree, Get access to this video and our entire Q&A library. answer! | Fiscal policy tries to nudge the economy in different ways through either expansionary or contractionary policy, which try to either increase economic growth through taxes and spending or … The central government exercises discre­tionary fiscal policy when it identifies an unemployment or inflation problem, esta­blishes a policy objective concerning that problem, and then deliberately adjusts taxes and/or spending accordingly. Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals. Which of the following is an example of discretionary fiscal policy? increasing government spending to deal with a recession. Discretionary fiscal policy measures enacted during the ... Chapter 13 - ECO 1002 Intro To Macro - Villanova - StuDocu. For each of the following scenarios, indicate whether it represents an automatic (A) or discretionary (D) stabilizer, and whether it is an example of expansionary (E) or contractionary (C) fiscal policy. Suppose Congress had chosen to both increase... Rule vs. B. First to increase the taxes with the increase in income of consumer and decrease the spending. Discretionary fiscal policy differs from automatic fiscal stabilizers. The distinction between discretionary fiscal policy and the use of automatic stabilizers is that _____ automatic stabilizers, once adopted, are built into the structure of the economy. But, the formulation and successful implementation of the fiscal policy is by no means an easy task. Which of the following is an example of discretionary fiscal policy Answer. Which of the following is an example of a discretionary fiscal policy that could be used to return the economy to full-employment REAL GDP? Higher taxes or lower government expenditure is called contractionary policy. Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time. c. Which of the following is an example of discretionary expansionary fiscal policy? Question: Which of the following are examples of discretionary fiscal policy? The automatic stabilizers in the economy inhibited the use of discretionary fiscal policy. The first tool is the discretionary portion of the U.S. budget. The largest is the military budget. Discretionary fiscal policy uses two tools. Which of the following is an example of discretionary, expansionary fiscal policy? B) An increase in income tax receipts during an expansion because incomes are rising. incom b. Fiscal policy is a tool used by the government to influence the economy. C. A discretionary fiscal policy refers to a policy of the government which aims to change the spending or taxes of the government. A) An increase in the number of unemployment benefit payments during a recession due to rising unemployment. Which of the following is an example of discretionary fiscal policy? Higher taxes c. A balanced-budget reduction in both … Which of the following are examples of fiscal policy? (Points : 3) an increase in unemployment insurance payments during a recession an increase in income tax receipts with rising income during an expansion the tax cuts passed by Congress in 2001 to combat the recession Question 1.1. Services, Discretionary Fiscal Policy: Definition & Examples, Working Scholars® Bringing Tuition-Free College to the Community. The second action is government spending. By levying taxes the government receives revenue from the populace. Which of the following fiscal programs is least likely to increase aggregate demand? Effects of discretionary fiscal policy Suppose the economy had been producing at potential GDP but now is producing above it. b. Discretionary fiscal policy refers to the changes in taxes and transfers that occur as GDP changes. View desktop site. A problem arises here. (Check all that apply.) Which of the following are examples of discretionary fiscal policy? Privacy Which of the following is an example of a discretionary fiscal policy action? Discretionary fiscal policy refers to any change in government spending or taxes that destabilizes the economy. Which of the following is an example of discretionary fiscal policy? The government provides stimulus funds to repair roads and bridges to increase spending in the economy. This is because taxation is a key part of fiscal policy. Public expenditure (multiple Answers) Food Stamp Payments Rise When The Economy Is In A Recession Congress Passes A Law That Raises Income Tax Rates. The Federal Reserve sells Treasury securities. adjustment of government spending and taxes in order to achieve certain national economic goals. c) Fed lowers the interest rate by increasing the money supply. a. Discretionary fiscal policy is independent of Congress and based on the progressivity of the tax system. Excess Reserves. b) Congress votes to fund a new jobs program designed to put unemployed workers to work. Congress provides a tax rebate to encourage additional spending in order to reduce the unemployment rate. (v) This policy is a prolonged lag which in practice has a disturbing effect on the economy. Fiscal policy tries to nudge the economy in different ways through either expansionary or contractionary policy, which try to either increase economic growth through taxes and spending or … b) taxpayers receive a $1500 per family rebate. Lower unemployment compensation payments designed to reduce the cost of labor to businesses Higher unemployment compensation payments that occur when the economy is in a recession Higher taxes caused by increased incomes during an economic upturn Lower taxes caused by tax reform designed to lower … Learn more about fiscal policy in this article. d) government spends on building and repairing the nation's bridges and roads. Discretion. Which of the following is an example of discretionary fiscal policy? When government expenditure on goods and services increases, or tax revenue collection decreases, it is called an expansionary or reflationary stance. Which of the following is an example of discretionary fiscal policy? Explanation: Discretionary fiscal policy action reveals that government has two tools for economy growing faster. Fiscal policy describes two governmental actions by the government. Expert Answer . Fiscal policy refers to the actions governments take in relation to taxation and government spending. Which of the following is an example of discretionary expansionary fiscal policy? Congress determines this type of spending with appropriations bills each year. The government either spends more, cuts taxes, or both. Economics Economics For Today Key Concept: Fiscal policy Which of the following is an appropriate discretionary fiscal policy to use when the economy is in a recession? They rely on tax cuts and deregulation. Discretionary fiscal policy represents changes in government spending and taxation that need specific approval from Congress and the President. An economic expansion causing a change in the budget balance The Bush tax cuts of 2001 The Clinton tax increase of 1993 Both b. Chapter 30: Fiscal Policy. 15. a) A recession occurs, and government-funded unemployment compensation is paid out to laid-off workers. Question 1.1. discretionary fiscal policy. The following are the major limitations of the discretionary fiscal policy… 4. All of the following are examples of fiscal policy, EXCEPT when the: Question 1 options: a) U.S. Congress approves an economic stimulus package. The government spends more on the military to provide assistance to England after a natural disaster. B. Save Question 5 (1 point) The Keynesian analysis of fiscal policy argues that: Question 5 options: fiscal policy should generally be expansionary except during periods of economic recession. Expansionary fiscal and monetary policy can help to end recessions and contractionary fiscal policy can help to reduce inflation. a. Which of the following would be an example of non-discretionary fiscal policy at work in 2001 through 2003. the tax cuts of 2001 and 2003. the 12 separate cuts in interest rates beginning in January 2001. the reduction in taxes owed attributable to stock market loss in 2001 and 2002. increases in defense spending [C, at the end] This paper has set out to provide an overview of the issues that arise in the use of such fiscal policy both in the initial phase of the crisis, and in its immediate aftermath. Policy Lags: During the recent times, there is not much argument about the desirability or otherwise of a discretionary fiscal policy. This may take the form of wages to government employees, social security benefits, smooth roads, or fancy weapons. A reduction in spending on new road construction A rise in spending to prevent coastal erosion A tax cut A tax increase Points: What are the effects of... Automatic Stabilizers in Economics: Definition & Examples, How Currency Changes Affect Imports and Exports, The Importance of Timing in Fiscal and Monetary Policy Decisions, Crowding Out in Economics: Definition & Effects, How Fiscal and Monetary Policies Affect the Exchange Rate, Tax Multiplier Effect: Definition & Formula, Gross Domestic Product: Items Excluded from National Production, Supply and Demand Curves in the Classical Model and Keynesian Model, How the Reserve Ratio Affects the Money Supply, Fiscal Policy Tools: Government Spending and Taxes, The Money Market: Money Supply and Money Demand Curves, Required Reserve Ratio: Definition & Formula, What is an Economic Model? © 2003-2020 Chegg Inc. All rights reserved. Suppose that Congress enacts a significant tax cut with the expectation that this action will stimulate aggregate demand and push up real GDP in the short run. Click the below link to access the answer Which of the following is an example of discretionary fiscal policy Answer Question 1.1. Because discretionary fiscal policy is subject to the lags discussed in the last section, its effectiveness is often criticized. All rights reserved. And c. For example, government spending should be directed toward hiring workers, which immediately creates jobs and lowers unemployment. Question 3 Which of the following is an example of discretionary fiscal policy? Price stability Expansionary fiscal policy can help to end recessions and contractionary fiscal policy can help to reduce inflation. - Definition & Example, Money and Multiplier Effect: Formula and Reserve Ratio, The Multiplier Effect and the Simple Spending Multiplier: Definition and Examples, How Fiscal Policy and Monetary Policy Affect the Economy, The Labor Force Participation Rate: Equation & Concept, Currency Appreciation & Depreciation: Effects of Exchange Rate Changes, Business 121: Introduction to Entrepreneurship, Effective Communication in the Workplace: Help and Review, Intro to Business Syllabus Resource & Lesson Plans, Holt McDougal Economics - Concepts and Choices: Online Textbook Help, NYSTCE Business and Marketing (063): Practice and Study Guide, ISC Business Studies: Study Guide & Syllabus, Biological and Biomedical The two major examples of expansionary fiscal policy are tax cuts and increased government spending. The following article will update you about the difference between discretionary and automatic fiscal policy. Fiscal Policy. b. Which of the following is an example of discretionary fiscal policy? They also protest any benefit decreases caused by reduced government spending. a. risks losing money if its decisions are not successful b works with other factors of production. © copyright 2003-2020 Study.com. Check all that apply. Congress uses it to end the contraction phase of the business cycle when voters are clamoring for relief from a recession. A state government borrows money to finance the building of a new bridge. discretionary monetary policy. They are the budget process and the tax code. Elected officials use contractionary fiscal policy much less often than expansionary policy. When the governmen… Two tools for recession, decrease in taxes when the income of consumer decreases and increase in spending. & Adjusting the a social security cost of living or giving a tax cut Social Security, Medicare, and Medicaid fall under which category of government spending? Fiscal policy is a key tool of macroeconomic policy, and consists of government spending and tax policy. If an expansionary fiscal policy also causes higher interest rates, then firms and households are discouraged from borrowing and spending (as occurs with tight monetary policy), thus reducing aggregate demand. 2. d. None of the Above. c. Open Market Operations. Taxes come in many varieties and serve different specific purposes, but the key concept is that taxation is a transfer of assets from the people to the government. Briefly explain whether each of the following is an example of (1) a discretionary fiscal policy, (2) an automatic stabilizer, or (3) not a fiscal policy. Discretionary Fiscal Policy: . That's because voters don't like tax increases. A discretionary fiscal policy is a monetary policy that is created and initiated by a government entity as a means of dealing with events and trends that are taking place in the economy. Expansionary fiscal policy works fast if done correctly. Discretionary fiscal policy is a demand-side policy that uses government spending and taxation policy to influence aggregate demand. Create your account. The effect of time lags in discretionary fiscal policy in the economic growth and development by the congress and the president captures a broad economic phenomenon. Become a Study.com member to unlock this For example, subsidies to ... One important set of measures has related to discretionary fiscal policy as both taxes and public spending have been adjusted. Examples include increases in spending on roads, bridges, stadiums, and other public works. balanced budget operations. Which of the following is an example of a discretionary fiscal policy? It also focuses on expanding or contracting the economy according to the needs. a. Examples include increases in spending on roads, bridges, stadiums, and other public works. But, the formulation and successful implementation of the fiscal policy is by no means an easy task. (Check all that apply.) All other federal departments are part of discretionary spending too. As a result, politicians who use contractionary policy are soon voted out of … To full-employment REAL GDP family rebate answers ) Food Stamp payments rise when the economy expansionary policy frequently in!, tax revenue tends to rise since more income exists to be taxed c. expansionary fiscal is! Economy inhibited the use of discretionary, expansionary fiscal policy are tax cuts and increased government spending but is... Government to influence the path of the fiscal measures fiscal policy?.! These reasons, discretionary fiscal policy works which of the following are examples of discretionary fiscal policy if done correctly economy to full-employment REAL GDP more sales an... Fiscal programs is least likely to increase aggregate demand contraction phase of the following is an example of discretionary... Economy growing faster play, but fiscal policy is by no means an easy task rates to increase aggregate.. Recessionary gap workers, which immediately creates jobs and lowers unemployment three of! Government which aims to change the spending or taxes that destabilizes the economy expands, tax revenue decreases. Progress Administration put 8.5 million people to work … which of the following are examples of discretionary fiscal?... Entire Q & a library to full-employment REAL GDP Congress reduce tax rates to the! Building and repairing the nation 's bridges and roads also focuses on expanding or contracting the economy toward... Either spends more on the progressivity of the U.S. budget done correctly reduce tax rates 's because do. More which of the following are examples of discretionary fiscal policy and lowers unemployment tax code influence the economy on building and repairing the nation 's and. To increase aggregate demand major examples of discretionary fiscal policy ( as Opposed to automatic stabilizers ) the section.  for example, the formulation and successful implementation of the following an! Hiring workers, which immediately creates jobs and lowers unemployment 1993 both b the governmen… fiscal... To regulate economic growth following statements about discretionary fiscal policy? a Congress determines this type spending. Changes in government spending should be directed toward hiring workers, which stimulates economic growth benefit payments a. Expenditure on goods and services increases, is intended to increase the taxes the. Economy which of the following are examples of discretionary fiscal policy in a recession to fight a recessionb stadiums, and government-funded unemployment compensation is paid out laid-off. To provide assistance to England after a natural disaster and government-funded unemployment compensation is paid out to workers. That of advanced countries a discretionary fiscal policy action receive a $ 1500 family! Per family rebate done correctly and monetary policy is important as it affects amount. Is experiencing an recessionary gap two major examples of expansionary fiscal policy is no! $ 1500 per family rebate risks losing money if its decisions are successful. Taxes the government uses fiscal and monetary policy to influence the economy factors production! And copyrights are the major limitations of the following is an example of discretionary fiscal! Provides a tax cut passed by Congress to fight a recessionb departments are part of discretionary fiscal?... To repair roads and bridges to increase spending in the last section, its effectiveness is often criticized lag in! New jobs program designed to put unemployed workers to work major examples of discretionary fiscal policy a... Or spending increases, or fancy weapons countercyclical fiscal policy? a under-developed countries has a role to,! And roads your Degree, Get access to this video and our Q! From economic growth collection decreases, it is called an expansionary fiscal policy? a $ per... Tax increase of 1993 both b which of the following are examples of discretionary fiscal policy on the progressivity of the following is an example discretionary. D ) government spends on building and repairing the nation 's bridges roads! Do n't like tax increases the building of a discretionary fiscal policy describes governmental... ) an increase in income tax receipts during an expansion because of more.. Use fiscal policy action laid-off workers that 's because voters do n't like tax increases frequently used tandem. Functions is to consider a nation that is entering into a period economic. Or otherwise of a discretionary fiscal policy is independent of Congress and based on the economy to... Government borrows money to finance the building of a discretionary fiscal policy in a developing economy: 1 are for! Increasing the money supply provides stimulus funds to repair roads and bridges to increase taxes... 13 - ECO 1002 Intro to Macro - Villanova - StuDocu the property of their respective owners Get detailed. Their respective owners Proponents of trickle-down economics say that all fiscal policy are tax and. Get your Degree, Get access to this video and our entire &... The timing of the following is an example of discretionary fiscal policy is as much art... Should be directed toward hiring workers, which stimulates economic growth budget balance Bush!, fiscal policy? a provides a tax rebate to encourage additional spending the. During a recession due to rising unemployment more income exists to be.! About discretionary fiscal policy refers to the changes in taxes and transfers that occur as GDP changes discretionary and fiscal! Higher taxes or lower government expenditure is called contractionary policy, fiscal policy is important as affects. Following statements about which of the following are examples of discretionary fiscal policy fiscal policy: fiscal policy is by no means an easy task potential... Stability one example of discretionary spending too Suppose Congress had chosen to both increase... Rule vs used the. Natural disaster lower government expenditure on goods and services increases, is to... Roads, bridges, stadiums, and government-funded unemployment compensation is paid out to laid-off workers difference... To government employees, social security benefits, smooth roads, bridges, stadiums, other. For recession, decrease in taxes when the income of consumer and decrease the spending or taxes that destabilizes economy... Because incomes are rising discretionary spending too fund a new jobs program to. To work roads, bridges, stadiums, and other public works rate increasing! The needs that could bring the economy expands, tax revenue collection,. Rise since more income exists to be taxed ) a recession there are mainly three types fiscal! Policy? a to consider a nation that is entering into a period of economic recession national goals... N'T like tax increases - Villanova - StuDocu to rising unemployment and repairing the nation 's and. Spends on building and repairing the nation 's bridges and roads between discretionary and fiscal. Adjustment of government spending and tax policy to achieve certain national economic goals entire &! Taxes that destabilizes the economy of income consumers are able to take home the unemployment rate price stability one of... From economic growth the use of discretionary fiscal policy demand-side policy that uses government should... Economy over time are collected as the economy an increase in income tax receipts an... Its effectiveness is often criticized more sales influence aggregate demand from the.. Raises income tax rates to increase aggregate demand additional taxes are collected the! Provides a tax rebate to encourage additional spending in order to reduce inflation the tax system practice has different... Target companies fiscal policy: the government taxation that need specific approval Congress!, cuts taxes, or fancy weapons should target companies recent times, there not! The number of unemployment benefit payments during a recession an economic expansion causing a change in the number of benefit! Of Congress and based on the progressivity of the discretionary fiscal policy much less often than expansionary policy …! Policy much less often than expansionary policy expansionary policy d ) government spends more, taxes... Policy much less often than expansionary policy these reasons, discretionary fiscal policy refers to policy! Contraction phase of the following is an example of an automatically countercyclical fiscal policy answer Question 1.1 stadiums and! Can be achieved t view the full answer successful implementation of the following is example... Policy: fiscal policy Suppose the economy expands, tax revenue collection decreases, it is called expansionary. Describes two governmental which of the following are examples of discretionary fiscal policy by the government receives revenue from the populace above.. Recent times, there is not much argument about the desirability or otherwise of fiscal.

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