Macroeconomics 11th Edition by Michael Parkin

Exercise 36

Fiscal Stimulus
The economy is in a boom and the inflationary gap is large.
a. Describe the discretionary and automatic fiscal policy actions that might occur.
b. Describe a discretionary fiscal restraint package that could be used that would not produce serious negative supply-side effects.
c. Explain the risks of discretionary fiscal policy in this situation.