Analyze the difference between discretionary and nondiscretionary fiscal policy.
Explain the effects of discretionary and nondiscretionary fiscal policy on governmental revenue and expenditures.
Describe how discretionary and nondiscretionary fiscal policies are being used today.
Difference between Discretionary and Nondiscretionary Fiscal Policy
Fiscal policy refers to the governmental actions through which it can maintain revenue and control expenditure. It can be of two types, discretionary and nondiscretionary fiscal policy (Carrere & Melo, 2008). Discretionary fiscal policy is the government action that indicates towards planned action to balance the economy whereas nondiscretionary fiscal policies are happening automatically. Both types of fiscal policies are differing with each other. The Nondiscretionary fiscal policy includes the laws that automatically speedup or slow down the economic growth (Brixi, & Schick, 2002, p. 177-179). On the other hand, discretionary fiscal policy includes new laws that are designed to balance the economy.
On the slope down condition of the economy the nondiscretionary laws give a rise in governmental spending or decrease the taxes. On the other hand, if the economy grows too fast then the laws helps to avoid inflation with decrements in governmental spending or an increase in taxes. In discretionary fiscal policy the decision to made changes in tax rates is appeared when the economy faces hard time like a recession or economic turbulence. The handling of several challenging situations is concerned under a discretionary fiscal policy. So, it used for making quick changes whereas nondiscretionary is one that is implemented in the long run (Farina & Tamborini, 2008, p. 77-80). Nondiscretionary includes the laws that are generally but discretionary includes laws that are made in sudden situation.
Effects of Discretionary and ...
The expert analyzes the differences between discretionary and non discretionary fiscal policy. The effects of discretionary and non discretionary fiscal policy on governmental revenues and expenditures are explained.