Discretionary fiscal policy and automatic stabilisers


Discuss how the government can use discretionary fiscal policy and automatic stabilisers to stabilise fluctuations in real GDP. What tools does the government have at its discretion to stabilise the economy? Suppose the government decides to decrease income taxes. Show in a diagram and explain how this policy will lead to an increase in real GDP both in the short run and in the long run.

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HR Management: Discretionary fiscal policy and automatic stabilisers
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