What does discretionary fiscal policy refer to?

1 Answer
Jan 1, 2016

It refers to sudden and not previously announced or predicted measures.


Discretionarity refers to arbitrary impositions taken without announcements or even legal approvals. In terms of fiscal policy, it refers to either government revenue (taxes) or expenditure (spending).

Thus, discretionary fiscal policy refers to the sudden imposition of new taxes or changes in their rates, and/or on how to spend government revenue.

Government spending is a hugely broad area, which can span into all economic sectors, depending on the length of state-owned activities in a country.