Question

Which of the following is an example of discretionary fiscal policy?

• A. An increase in unemployment benefit payments during a recession due to rising unemployment
• B. The tax increases to combat rising inflation
• C. A decrease in income tax receipts during a recession because incomes are falling
• D. An increase in income tax receipts during an expansion because incomes are rising

Answer 1

The correct option is B

The tax increases to combat rising inflation

Only option b is discretionary. The others are autonomous effects and are not deliberate actions taken by the government.