Practice question · Sort into groups
Sort each stabilizing force: automatic stabilizer or discretionary measure?
Groups: Automatic stabilizer · Discretionary measure
- Unemployment benefits rising as layoffs spread
- Parliament votes a new stimulus package
- A temporary VAT cut announced for six months
- Progressive taxation braking booms by itself
- Income tax receipts falling in a recession
Hints
- Ask whether the response needs a vote or happens by itself.
- Anything written into the existing rules acts instantly.
Show the answer
Automatic stabilizer: Unemployment benefits rising as layoffs spread, Income tax receipts falling in a recession, Progressive taxation braking booms by itself
Discretionary measure: Parliament votes a new stimulus package, A temporary VAT cut announced for six months
Why
Stabilizers are built into the rules and respond instantly; discretionary policy needs a decision, a vote, and time.
Practise Fiscal Policy
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More questions on Fiscal Policy
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