Homework answers / question archive / DePaul University ECO 502 1)Define and describe the concept of fiscal policy focusing on what is manipulated, by whom and for what reason     Why would economists argue that automatic stabilizers are an excellent tool that instituted by government that can quickly fight a newly developing recession     What is the difference between automatic stabilizers and discretionary fiscal policy?     Discretionary fiscal policy, to be truly effective, must have three basic characteristics

DePaul University ECO 502 1)Define and describe the concept of fiscal policy focusing on what is manipulated, by whom and for what reason     Why would economists argue that automatic stabilizers are an excellent tool that instituted by government that can quickly fight a newly developing recession     What is the difference between automatic stabilizers and discretionary fiscal policy?     Discretionary fiscal policy, to be truly effective, must have three basic characteristics

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6. Economists argue that discretionary fiscal policy actions that involve spending $100 billion would not have the same overall effect on the economy in the short run as a $100 billion cut in taxes. Why so?

7. Which type of discretionary fiscal policy is likely to have the smallest overall effect on GDP because of the low MPC related to the policy?

8. Some discretionary fiscal policy actions involve borrowing the money. Under what conditions would a rise in government spending financed by borrowing lead to very little, if any, increase in GDP?