Identify whether each of the following policies is an example of (1 ) a discretionary fiscal policy, (2 ) an example of an automatic stabilizer, or (3 ) not a fiscal policy

Question

a. Food stamps
b. Government spending on rebuilding airports
c. Tax credits for the purchase of energy efficient appliances
d. The extension of the "Bush tax cuts" of 2001 and 2003
e. Changing the required reserve ratio
f. The bailout of large financial institutions during the financial crisis
g. The progressive income tax system

Answer 1

a. Food stamps are an automatic stabilizer.
b. Government spending on rebuilding airports are discretionary fiscal policy.
c. tax credits for the purchase of energy efficient appliances are an environmental, and not a fiscal, policy.
d. The extension of the Bush tax cuts is a discretionary fiscal policy.
e. Changing the required reserve ration is monetary, and not fiscal, policy.
f. The bailout of financial institutions, in the sense that they occurred to achieve macroeconomic policy objectives of increased output and employment, would be a discretionary fiscal policy. In the sense that the bailouts were not expenditures on goods and services, the bailouts are not fiscal policy.
g. The progressive income tax system is an automatic stabilizer.