1. Distinguish between Discretionary Fiscal Policy and Automatic Fiscal Policy a

Question

1. Distinguish between Discretionary Fiscal Policy and Automatic Fiscal Policy and give an example of each.

2. Is current Discretionary Fiscal Policy Expansionary or Contractionary; provide your proof.

3. What is the current size of the deficit of the Federal Government? How does the government get the money to spend when running a deficit? What is the current size of the National Debt? http://www.cbo.gov/publication/45249 or (Links to an external site.) http://useconomy.about.com/od/fiscalpolicy/p/deficit.htm (Links to an external site.)

Explanation / Answer

1.

We know that the discretionary fiscal policy means that the delibrate manipulation of government purchases ,taxation, and transfer inorder to promote macro economic goals such as full employment ,price stability and economic growth.

In the case of automatic fiscal policy is that the economic policies are designed to offset the fluactuation in a nation's economic activity without intervention by the government . The automatic fiscal policy include corporate and personal taxes, also the transfer sytem which is unemployment benefits and welfare of the state.

2.

In the present sense The Federal reserve uses expansionary fiscal policy. We know that expansionary fiscal policy means that government increases spending and decreases tax rates.

3.

The current size of the deficit is $534 billion.

When the government running deficit the source of finance for the government is debt. The common method of debt is,

1. debt held by the public

2. Gross debt.

On the basis of latest data the current debt of the fed was,

$19.32 trillion. Exact

$19,230,634,229,070 on june 2016

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