Answer to Question #76069 in Macroeconomics for rajvinder

Question #76069

Describe a discretionary fiscal stimulus package that could be used that would not bring an increase in the budget deficit.

A discretionary fiscal stimulation package that would avoid a budget deficit is a simultaneous and equal ______.

A.
increase in government expenditure and an increase in taxes
B.
increase in transfer payments and a decrease in taxes
C.
decrease in transfer payments and increase in the quantity of money
D.
decrease in government expenditure and taxes
Explain the risks of discretionary fiscal policy in this situation

Discretionary fiscal policy is risky because it is hampered by all of the following lags except ______.

A.
law-making lag
B.
recognition lag
C.
impact lag
D.
business cycle lag

Expert's answer

1
A. increase in government expenditure and an increase in taxes
2
D. business cycle lag