Question

When the federal government changes purchases and/or taxes to stimulate the economy or rein in inflation, such policy is:_______.
a. active monetary policy
b. discretionary fiscal policy
c. active federal policy
d. sutomatic focal policy

Answer 1

Answer:

B. discretionary fiscal policy

Explanation:

Discretionary fiscal policy is used to stimulate an economy or rein in inflation. The government does this by making changes to it's expenditure, that is it's spending and also taxes. Such a policy can either expand or shrink the economy based on what the government is trying to achieve.

Government spending alongside taxation are used to influence aggregate demand. This would help to close deflationary gap