She holds a BA in Marketing and International Business and a BA in Psychology. She works closely with small businesses and large organizations alike to help them grow and increase brand awareness. 23, 2020.Īndra Picincu is a digital marketing consultant with over 10 years of experience. "H.R.5140 - Economic Stimulus Act of 2008." Accessed September 23, 2020. "H.R.1 - American Recovery and Reinvestment Act of 2009." Accessed September 23, 2020. "Chapter 3 The Economic Impact of The American Recovery and Reinvestment Act Five Years Later,". Intelligent Economist: Discretionary Fiscal Policy.University of Minnesota Libraries: The Use of Fiscal Policy to Stabilize the Economy.
For this reason, government intervention may be necessary in order to stabilize the economy. One thing is for sure: Automatic stabilizers alone are not enough to correct the problem during times of recession or inflation. Whenever government expenditure increases, the money has to come from somewhere.īoth automatic stabilizers and discretionary fiscal policies have their perks and limitations. Furthermore, they may have an exaggerated effect on government finances.įor instance, government borrowing during times of recession increases, which in turn limits the funds available to the private sector for research, investments and other factors that would otherwise stimulate economic growth. Discretionary fiscal policies, on the other hand, can address economic issues that are not tied to the aggregate demand.Īdditionally, automatic stabilizers are not an option in less-developed countries as the country must have a well-developed tax and social welfare system in place. A limitation of the automatic stabilization policy is that it doesn't work if inflation is caused by factors other than those affecting aggregate demand.
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