Answer to Question #16222 in Economics of Enterprise for babu

Question

What is the difference between discretionary fiscal policy and the automatic stabilisers? How can the budget actually affected by the business cycle or economic activity in general? What is the most non-inflationary way of financing a budget deficit?

Answer 1

The difference between discretionary fiscal policy and automatic stabilizers is that discretionary fiscal policy allows humans to control expenditure via the
government, while automatic stabilizers are controls that have been
established.
The budget deficit increases in times of recession, as the state income tax revenues are falling, and the volume of transfer payments increased. During recovery the opposite situation occurs.
Most non-inflationary way is depreciation of the exchange rate. It does not create additional money.