Definition of Discretionary Fiscal Policy

Hi Mustafa, let's solve this together by defining what discretionary fiscal policy means in economics.

First, fiscal policy involves government decisions regarding taxing and spending to influence the economy.

The term discretionary means that the government has to take a specific action or pass a law to make these changes happen.

This is often used to address a recessionary gap—where the economy is underperforming—or an inflationary gap—where it is overheating.

Now, let's evaluate our options. Option A describes exactly what we just discussed: changes in spending or taxes to close economic gaps.