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Select all that applyDiscretionary fiscal policy consists of deliberate changes in government spending and taxation designed to do which of the following?Multiple select question.Achieve full employmentControl inflationAdjust the money supplyManage the interest rateEncourage economic growth

Question

Select all that applyDiscretionary fiscal policy consists of deliberate changes in government spending and taxation designed to do which of the following?Multiple select question.Achieve full employmentControl inflationAdjust the money supplyManage the interest rateEncourage economic growth

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Solution

Discretionary fiscal policy is a government strategy that involves altering spending and taxation to influence the economy. The main objectives of this policy are:

  1. Achieve full employment: Yes, discretionary fiscal policy can be used to stimulate job growth and reduce unemployment. For example, the government can increase spending on public projects, which can create jobs and reduce unemployment.

  2. Control inflation: Yes, discretionary fiscal policy can be used to control inflation. For example, the government can increase taxes or reduce spending to decrease the amount of money in circulation, which can help to control inflation.

  3. Adjust the money supply: No, adjusting the money supply is typically the role of monetary policy, which is controlled by the central bank, not fiscal policy.

  4. Manage the interest rate: No, managing the interest rate is also typically the role of monetary policy, not fiscal policy.

  5. Encourage economic growth: Yes, discretionary fiscal policy can be used to encourage economic growth. For example, the government can decrease taxes and increase spending to stimulate the economy.

So, the correct answers are "Achieve full employment", "Control inflation", and "Encourage economic growth".

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