Distinguish between automatic stabilizers and discretionary fiscal policy in terms of how they affect the economy....

Distinguish between automatic stabilizers and discretionary fiscal policy in terms of how they affect the economy. Give an example of each.

Expert Solution

automatic stablizers is a type of automatic fiscal policy of the government also known as automatic stablisation which takes place when the changing economic conditions automatically change the government expenditures and government tax regime which helps to combat and control unemployment and demand pull inflation . these actions take place without the influence of any or any deliberate action of the legislative body rather it stimulates aggregate recession and reduce aggregate spending during expansion .

deliberate fiscal policies are the polices enacted by the the central government and are discretionary in nature that are enacted to combat situation of unemployment or inflation by deliberately adjusting taxes and spending thereof to control the situataion . depending upon the conditions the central government may --

1. raise the taxes or cut the taxes

2. change personal income tax exemptions and deductions

3. grant of tax rebates

4. levy surcharges

5. intiate or postpone transfer programme

Rahul Sunny answered 2 years ago

What is the difference between automatic stabilizers and discretionary fiscal policy?

What is the difference between discretionary fiscal policy and automatic stabilizers? Be careful to define each...

What is the difference between discretionary fiscal policy and automatic stabilizers? Be careful to define each carefully. What are the advantages and disadvantages of each?

Describe how certain aspects of fiscal policy function as automatic stabilizers for the economy.

(1 Question, 2-parts) Consider automatic stabilizers (aka non-discretionary fiscal policy): 1) How does the United States'...

(1 Question, 2-parts) Consider automatic stabilizers (aka non-discretionary fiscal policy): 1) How does the United States' structure of taxes and government spending add stability in this specific scenario: The U.S. economy is experiencing high GDP growth rates and has a high (and increasing) inflation rate? 2) What effect do automatic stabilizers have on the U.S. Government Budget if the economy is sliding into a recession? Please be specific in describing the impacts on the budget, and only if the economy...

In fiscal policy, what are automatic stabilizers? Give two examples.

a. What are automatic fiscal stabilizers? How do these stabilizers stabilize real GDP in the face of...

a. What are automatic fiscal stabilizers? How do these stabilizers stabilize real GDP in the face of AD and AS shocks? b. What is the role of the simple multiplier [ 1/{1 - MPC(1 - t) - m}] in stabilization of the swings in real GDP? c. How the slope of the AD curve affects the stability of real GDP in the presence of AS shocks? d. How the automatic stabilizers depend on the sizes of MPC, t, and m.

What are some limitations of discretionary fiscal policy in combating a recession? What about automatic fiscal...

What are some limitations of discretionary fiscal policy in combating a recession? What about automatic fiscal policy?

#1 Please identify what they are (i.e., discretionary fiscal policy, monetary policy, or automatic stabilizer) and...

#1 Please identify what they are (i.e., discretionary fiscal policy, monetary policy, or automatic stabilizer) and explain why. 1a) A terrible recession occurs as a result of a bubble in the housing market bursting, and government-funded unemployment compensation is paid out to laid-off workers. 1b) As the economy heats up, the resulting increase in equilibrium GDP results in higher income tax payments, which dampen consumption spending somewhat. 1c) To stem an overheated economy, the president, using special powers granted by...

Differentiate between discretionary fiscal policy and nondiscretionary or built-in stabilization policy.

Classify the actions as either discretionary spending or automatic stabilizers by placing each item in one...

Classify the actions as either discretionary spending or automatic stabilizers by placing each item in one of the two categories. Discretionary Spending Automatic stabilizers - A bill is passed to increase unemployment benefit payments - Government spending on welfare increases because high unemployment leads to an increase in applicants - A law is enacted that increases Medicare coverage - The government cuts taxes to stimulate consumer spending - The government increases tax rates to prevent inflation - Tax revenue increases...

Question