Is there any way to conduct fiscal policy and avoid the lags involved with discretionary policy?
Programs that act as automatic stabilizers tend to boost aggregate demand during recessions and restrict aggregate demand during inflationary periods. Examples of automatic stabilizers include the unemployment compensation system, the corporate profits tax, and the progressive income tax. These programs act countercyclically without requiring legislative action, and therefore, they avoid some of the lags usually associated with discretionary policy.
You might also like to view...
The Federal Open Market Committee has responsibility for
A) advising the Treasury Department on monetary policy. B) printing money. C) issuing orders to buy or sell government securities for the Fed. D) appointing members to the Board of Governors of the Federal Reserve system.
According to the misperceptions theory, after an unanticipated increase in the money supply has occurred, the SRAS curve must shift ________ to restore general equilibrium; as it does so, the price level ________
A) downward; rises B) downward; falls C) upward; rises D) upward; falls