alleryStart learning →Discretionary fiscal policy occurs when the government passes a new law that explicitly changes:
ATax or spending levels
BInterest rate targets
CExchange rate bands
DBank reserve ratios
Answer & Solution
Correct answer: A. Tax or spending levels
1. Discretionary means someone had to decide and legislate.
2. Federal fiscal policies include discretionary fiscal policy.
3. That is when the government passes a new law.
4. The law explicitly changes tax or spending levels.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 16 'Government Budgets and Fiscal Policy'_
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