Which policy is an example of discretionary fiscal policy?
Correct answer: B. A government decision to fund a new motorway project
- A. A rise in unemployment benefits during a downturn
- B. A government decision to fund a new motorway project
- C. A fall in tax revenue caused by lower household incomes
- D. A reduction in welfare payments caused by fewer claims
Explanation
Discretionary fiscal policy involves a deliberate change in government spending or taxation. Unemployment benefits and tax revenue can change automatically with economic conditions and are therefore automatic stabilizer effects.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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