Question

15. What kind of fiscal policy are the followings? Distinguish in terms of discretionary' and automatic fiscal policy. a. Claims for welfare payments rise b. Economy heads to recession and more people fall into lower income tax bracket c. Congress passes a spending bill to tackle recession.

Answer 1

Discretionary fiscal policy is the one that is deliberately proposed by the federal government with proper planning and implementation program. automatic fiscal policy works without the discretion of the Government and it works according to the business cycle of recession and expansion

claims for welfare payments are a part of automatic fiscal policy because his claims depend upon the number of eligible candidates which changes with business cycle.

As the income is reduced under recession people automatically found themselves paying lower taxes which means it is not discretionary but automatic fiscal policy

In this case Congress is passing a bill which means there is a proper discretion over the represented bill in the senate. This is a part of discretionary fiscal policy