Discretionary fiscal policy

Definition

Discretionary fiscal policy refers to deliberate changes in government spending or taxation enacted by policymakers with the intention of influencing economic conditions. These changes are not automatic but rather based on discretionary decisions made by authorities.

Related terms

Automatic stabilizers: Government programs that automatically adjust spending or taxes in response to changes in the economy, without requiring new legislation.

Fiscal stimulus: Measures taken by the government to boost economic activity during periods of low growth or recession.

Budget deficit: The amount by which government spending exceeds government revenue in a given period.