The economy has a large recessionary gap. Of the following fiscal policy changes that might occur, which is discretionary and which is automatic?
A discretionary stimulus is ________ and an automatic stimulus is ________.

Question

The economy has a large recessionary gap. Of the following fiscal policy changes that might occur, which is discretionary and which is automatic? 
 A discretionary stimulus is ________ and an automatic stimulus is ________.

Answer

the government's decision to cut taxes; falling tax revenues

Answer

the government's decision to cut its outlays; the government's decision to increase transfer payments

Answer

increasing transfer payments with no government action; a government's decision to cut taxes

Answer

the government cuts the real interest rate; an increase in investment

Answer

rising transfer payments with no action of the government; a cut in government expenditure

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The economy has a large recessionary gap. Of the following fiscal policy changes...

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