Example Of Discretionary Spending

Decent Essays
Fiscal policy is budgetary plan such as changes in government spending and taxation to attain a specific economic objective. The discretionary fiscal policy encompasses fine-tuning government spending and taxes with the explicit goal of affecting the economy towards the future full employment of the workforce, increasing growth of the economy, and control of inflation. Examples of discretionary spending:
Foreign Aid
Science and Technology
A recessionary gap is when the economy isn’t at its capacity. When the actual productivity is below its potential economists, call it a recessionary gap. During a recessionary gap, workers aren’t working, and factories aren’t producing. High unemployment is a common consequence of recessionary
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The only option the government has to get the money to put into the economy is by borrowing. Policymakers have no problem pouring money in during tough times, but when the economy is booming these same politicians never want to pay back the borrowed money leading the creation of debt.
Furthermore, when the government borrows all this money another problem is created called “crowding out.” The interest rates are increased because of the deficit spending from the borrowing. Hence, the financing needed by private businesses is more difficult as well as the purchasing of new equipment or construction of new factories. Government borrowing deteriorates the strength of the economy as well as builds debt. Private spending decreases when government spending increases. Stimulation from government into the economy should only occur once it has been given a chance to recover on its own and failed.
The government intervention in the economy is not an overnight fix. The delay between the time the government attempts to stimulate the economy and the time consumers and industry feel it is known as the time lag and the process is as follows:
“Recognition time lag – the months that may elapse before national economic problems are identified” (Miller
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