Problem 31

Introduction

'Discretionary fiscal policy' is a macroeconomic policy based on the judgement of policy makers in the moment, as opposed to a policy set of predetermined rules. It refers to action taken in response to changes in the economy, but they do not follow a strict set of rules, rather they use subjective judgement to treat each situation in unique manner.

Whereas, 'Automatic stabilizer' are modern government budget policies that act to dampen fluctuations in real GDP.