Describe the difference between discretionary and automatic fiscal policy
What will be an ideal response?
Discretionary fiscal policy is initiated by an act of Congress. Automatic fiscal policy is determined by the state of the economy; no act of Congress is necessary to initiate automatic fiscal policy.
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What can the Federal Reserve do to reduce the natural rate of unemployment?
A) nothing B) follow expansionary monetary policy that will reduce inflation C) follow expansionary monetary policy that will increase inflation D) follow contractionary monetary policy that will increase inflation
Among the prospective rules that set target variables directly, only the nominal GDP rule
A) provides a nominal anchor. B) is easy for the Fed to achieve. C) allows a neutral response to a supply shock. D) is insulated from the effects of unstable velocity.