Chapter 11: Inflation, real GDP, monetary policy & fiscal policy 11.1 Inflation and aggregate demand 11.2 Aggregate supply Long-run aggregate supply (YP) Short-run aggregate supply 11.3 The equilibrium inflation rate 11.4 Adjustments to output gaps Fiscal policy - definitionFiscal policy refers to the use of taxes and government spending to achieve desirable changes in aggregate demand.There are three components of fiscal policy:Discretionary changes in tax rates - this generally means making changes in tax rates at times when they are needed. C) the discretionary changing of government expenditures and/or taxes to achieve (1) Built-in Stabilisers : The technique of built-in flexibility or stabilisers involves the automatic adjustment of the expenditures and taxes in relation to cyclical upswings and downswings within the economy without deliberate action on the part of the government. 11) Fiscal policy is defined as A) the design of a tax system to transfer income from the rich to the poor. Countercyclical policies aim to move demand in the opposite direction to the economic cycle eg increases in public spending in slumps It complements central bank monetary policy. As many authors have emphasized,4 U.S The largest is the military budget.. Deliberate changes in government spending and taxation Explain counter cyclical policies. These are primarily for income maintenance purpose. Fiscal policy definition is - the financial policy of a government particularly as regards the budget and the method and timing of borrowings and especially in relation to central-bank fiscal-policy definition: Noun (plural fiscal policies) 1. This is the correct answer.E. But there are, of course, other determinants of fiscal policy. Nondiscretionary fiscal policy refers to various ongoing programs of government spending and taxation. Discretionary fiscal policy refers to: A. any change in government spending or taxes that destabilizes the economy. These changes occur on a year by year basis and are used to reflect the current economic status. Discretionary fiscal policy is the term used to describe actions made by the government. The main novelty of this paper is the use, on the revenue side, of a dataset of fiscal measures based on the yield Fiscal policy describes two governmental actions by the government. discretionary fiscal policy with changes in the cyclically-adjusted primary balance. b. ISCAL POLICY Fiscal policy is best defined as: uncontrolled government spending altering the mix of government spending and taxing in order to balance the budget every fiscal year. b. is not very effective in influencing real gdp during normal times because of time lags. Fiscal Policy Aims: By the end of this chapter, you will be able to (i) distinguish discretionary fiscal policy from automatic stabilisers, (ii) evaluate the effectiveness of fiscal policy, and (iii) use AS-AD model to analyse the effect of a discretionary fiscal policy. Most people chose this as the best definition of discretionary-fiscal-policy: A fiscal policy achieved... See the dictionary meaning, pronunciation, and sentence examples. For all these reasons, discretionary fiscal and monetary policy is as much an art as a science. 125-137, December 2003 and A. Turrini, “Fiscal policy … (economics) Government policy that attempts to influence the direction of the economy through changes in government spending or taxes. Monetary policy works faster than fiscal policy. Tools Discretionary fiscal policy uses two tools. To find out what is discretionary fiscal policy, see this explanation. Define discretionary fiscal policy. Discretionary monetary policy is a more flexible approach whereby central bankers at the Fed can quickly react to changing factors to tweak the economy, especially in an unusual situation. 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-ECON Discuss the lags in fiscal policy and the relative advantages and disadvantages of automatic and discretionary policies. By levying taxes the government receives revenue from the populace. The relationship, however, is weak and not sta-tistically significant. Monetary policy refers to the Federal Reserve's work with the money supply to influence the economy. Fiscal policy has been a central tool for governments to counteract economic stagnation in the recent crisis, both in terms of automatic stabilization as well as discretionary fiscal policy. This blog is part of a special series on the response to the coronavirus. This paper studies the impact of political polarization on macroeconomic volatility in a political economy model of optimal fiscal policy. B. initiated by a Presidential proclamation. Discretionary fiscal policy is defined as a(n) _____ change in taxes and/or government spending in order to change equilibrium real GDP and employment. C. intentional changes in taxes and government expenditures made by Congress to stabilize the economy D. the changes in taxes and transfers that occur as GDP changes. 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. Economic term discretionary fiscal policy definition. They are usually rarely changed. Following the literature (e.g., Alesina and Perotti 1995), the event-study analysis identifies discretionary changes as “large” changes in the policy instruments, because even policy They include social security, welfare and unemployment compensation. B. the authority that the president has to change personal income tax rates. B) the use of Congressional power to pursue social and political goals. Examples include increases in spending on roads, bridges, stadiums, and other public works. C. triggered by the state of the economy. ABSTRACT This paper looks at the impact of discretionary fiscal policy on economic growth for a sample of 18 EU countries over the period 1998-2011. Fiscal policy refers to the use of government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, inflation and economic growth. Fiscal policy is how the government uses taxing and spending to expand or contract economic growth. Discretionary fiscal policy is defined as fiscal policy a. left to the discretion of military authorities b. initiated by and act of Congress c. initiated by a Presidential proclamation d. triggered by the state of … 4 See OECD Economic Outlook, “Fiscal policy and institutions”, 74, pp. resources. Further, explain why having a balanced budget might not be desirable (hint, think about how it might limit automatic stabilizers). Discretionary fiscal policy is defined as fiscal policy A. left to the discretion of military authorities. When the Great Recession began to play out, during the early days of the Obama administration, no one at the time knew the true extent of the economy’s output gap. The first is taxation. In macroeconomics, discretionary policy is an economic policy based on the ad hoc judgment of policymakers as opposed to policy set by predetermined rules. I introduce… Discretionary Fiscal Policy: 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. These changes are typally implemented Discretionary fiscal policy represents changes in government spending and taxation that need specific approval from Congress and the President. Many papers have investigated the effectiveness of stabilization policies in the recent recession, but little is known on the relationship between the two components of fiscal policy. (2) Discretionary fiscal policy. They are the budget process and the tax code.The first tool is the discretionary portion of the U.S. budget.Congress determines this type of spending with appropriations bills each year. rise in the GDP gap, consistent with the use of discretionary counter-cyclical fiscal policy. Words near discretionary-fiscal-policy in the Dictionary D. initiated by an act of Congress. Need to define discretionary fiscal policy? 3 The time-lag aspect regarding ﬁ scal policies is highlighted by A. Blinder, “The case against the case against discretionary ﬁ scal policy”, CEPS Working Paper 100, June, 2004. Discretionary fiscal policy is the purposeful change of government expenditures and tax collections by government to promote full employment, price stability, and economic growth. 2. Discretionary fiscal policy a. may reassure investors and consumers that the federal government will be able to avert a major economic downturn. 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