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?

Expert Solution

Answer Proper timing is crucial to apply discretionary fiscal policy to combat recession .Some of the practical problems that reduce the effectiveness of discretionary fiscal policy to control recession is having administrative lag, recognisition lag and inadequacy in fiscal measures

Recognisition lag- There is gap in time the action is needed and when it is recognized by government that action is needed. Such a lag has duration of 3 months. And due to that at appropriate time recession controlled activities do not apply.

Administrative lag- It is the time difference between action is needed and the time when the action is actually taken by government .Such a lag has duration of 1 to 15 months.

inadequacy in fiscal measures - It means that at recession government knows it can be controlled with increase in spending and deduction in taxes. But it needed in sufficient amount. If the spending and tax deduction is more or less, then adverse impact can be seen.

Automatic fiscal policy- Automatic stabilizer is a type of fiscal policy applied to control fluctuations in economic activities via their normal operations without additional and timely working by the government to attain stability.

Rahul Sunny answered 2 years ago

What is the difference between automatic stabilizers and discretionary 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...

What is fiscal policy? Who sets it? What are some of the limitations of fiscal policy?...

What is fiscal policy? Who sets it? What are some of the limitations of fiscal policy? Do these render fiscal policy ineffectual? Why or why not?

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?

What is the discretionary fiscal policy? Economists debate whether discretionary fiscal policy is an effective way...

What is the discretionary fiscal policy? Economists debate whether discretionary fiscal policy is an effective way to control and stimulate the economy. Present 2 arguments in favor of the view that fiscal policy is effective and 2 arguments that fiscal policy is ineffective or destructive to the economy. Be specific.

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.

What is discretionary fiscal policy? ______________________________ is a fiscal policy action that involves lowering taxes or...

What is discretionary fiscal policy? ______________________________ is a fiscal policy action that involves lowering taxes or raising government payments, which would shift the aggregate demand curve to the right. _________________________________ is a fiscal policy action that involves raising taxes or decreasing government payments (spending), which would shift the aggregate demand curve to the left. What is the Federal Reserve System? How many Federal Reserve districts are? How many Federal Reserve districts are located in Missouri and where are they located? ...

Limitations: Fiscal policy vs Monetary Policy Key Question: 1. What are the limitations of Fiscal policy?...

Limitations: Fiscal policy vs Monetary Policy Key Question: 1. What are the limitations of Fiscal policy? 2. What are the limitations of Monetary policy? 3. Which policy do you think is the most effective out of the two policies (Fiscal or Monetary policy). Why do you think so?

Answer the following questions: A- What is discretionary and non-discretionary fiscal policy? B- What are the...

Answer the following questions: A- What is discretionary and non-discretionary fiscal policy? B- What are the available tools of fiscal policy? C- What is monetary policy and who conducts it? D- What are the available tools of monetary policy? Using these introductory questions, present a detailed essay-type analysis, with all the information from a reliable source, of what consists of at least three fiscal policy incentives and one monetary policy incentive as a consequence of the COVID-19. In total, at...

a) Define what are expansionary and contractionary discretionary fiscal policies. b) Define what is automatic stabiliser...

a) Define what are expansionary and contractionary discretionary fiscal policies. b) Define what is automatic stabiliser in fiscal policy and provide 2 examples. c) Consider an economy that is operating below the full-employment level of GDP, what would be the effect of an increase in government spending on agreegated demand and real GDP.

Question