Discretionary fiscal policy is the direct result of which of the following?

• A. The direct result of deliberate actions by policy makers (Congress) rather than rules or the FED.
• B. Automatic adjustments to revenue and spending.
• C. Policies implemented by the central bank.
• D. Trade policy adjustments.

Answer: (A)

Discretionary fiscal policy is about intentional changes in government spending and taxes that lawmakers create in response to the economy. It requires new legislation or deliberate administrative action by policymakers, typically Congress (and the President). This differs from automatic stabilizers, which automatically offset fluctuations through built-in rules in the tax and transfer system without new laws. It also isn’t monetary policy, which the central bank conducts through interest rates and money supply, nor is it trade policy, which focuses on tariffs and trade rules. So the direct result comes from deliberate actions by policy makers rather than rules or the Fed.