One Advantage of Automatic fiScal Policy Over Discretionary fiScal Policy

question 331

Multiple Choice

One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy

• A) makes the actual budget a better reflection of the condition of the economy than the standardized budget.
• B) does not produce a cyclical deficit, as discretionary policy does.
• C) is not subject to the timing problems of discretionary policy.
• D) has a greater multiplier effect than discretionary policy.

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Definitions:

Net Pay

The amount of money an employee receives after all deductions, such as taxes and retirement contributions, have been subtracted from their gross pay.

Allowances

Reductions from the list price of goods or services, granted for various reasons such as defects or customer dissatisfaction.

Wage Base Limit

The maximum amount of income on which employees are required to pay certain taxes, such as social security taxes.

SUTA

The State Unemployment Tax Act, which mandates employers to pay state unemployment taxes to fund the unemployment compensation programs for workers in their state.