Examples of discretionary policy in the following topics:
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- Discretionary policies refer to subjective actions taken in response to changes in the economy.
- A discretionary policy is supported because it allows policymakers to respond quickly to events.
- A rule-based policy can be more credible, because it is more transparent and easier to anticipate, unlike discretionary policy.
- This can create compounding issues related to the discretionary policy enacted.
- A compromise between strict discretionary and strict rule-based policy is to grant discretionary power to an independent body.
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- In fiscal policy, there are two different approaches to stabilizing the economy: automatic stabilizers and discretionary policy.
- Discretionary policy is a macroeconomic policy based on the judgment of policymakers in the moment, as opposed to a policy set by predetermined rules.
- In practice, most policy changes are discretionary in nature.
- With discretionary policy there is a significant time lag.
- Discretionary policies can target other, specific areas of the economy.
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- Discretionary fiscal policy relies on getting the timing right, but this can be difficult to determine at the time decisions must be made.
- A nation can respond to economic fluctuations through automatic stabilizers or through discretionary policy.
- With discretionary fiscal policy, timing plays a very significant role.
- Discretionary policy often requires that a set of laws must be passed through a legislature.
- Explain the effect of timing on the use of fiscal policy tools
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- For much of the 20th century, governments adopted discretionary policies such as demand management that were designed to correct the business cycle.
- A discretionary policy is supported because it allows policymakers to respond quickly to events.
- However, discretionary policy can be subject to dynamic inconsistency: a government may say it intends to raise interest rates indefinitely to bring inflation under control, but then relax its stance later.
- A compromise between strict discretionary and strict rule-based policy is to grant discretionary power to an independent body.
- Another type of non-discretionary policy is a set of policies which are imposed by an international body.
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- Expansionary monetary policy is traditionally used to try to combat unemployment in a recession by lowering interest rates.
- Monetary policy uses a variety of discretionary tools to control one or both of these to influence outcomes like economic growth, inflation, exchange rates with other currencies, and unemployment.
- For example, if the central bank is implementing expansionary policy but is committed to keeping interest rates low, the central bank needs to convey this policy with credibility, otherwise economic agents may assume that expansionary policy will lead to inflation and begin augmenting behavior to initiate the outcome expected, higher inflation.
- The increase in the money supply is the primary conduit for expansionary monetary policy.
- Assess the value of discretionary expansionary monetary policy and the associated shortcomings.
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- Unlike the cyclical budget deficit, a structural deficit is the result of discretionary, not automatic, fiscal policy.
- While automatic stabilizers don't actually shift the aggregate demand curve (because transfer payments and taxes are already built into aggregate demand), discretionary fiscal policy can shift the aggregate demand curve.
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- Income security policy is designed to provide a population with income at times when they are unable to care for themselves.
- Income Security Policy is usually applied through various programs designed to provide a population with income at times when they are unable to care for themselves.
- Discretionary benefits.
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- In the short-run, tax revenues have declined significantly due to a severe recession and tax policy choices, while expenditures have expanded for wars, unemployment insurance and other safety net spending.
- Major categories of FY 2012 spending included: Medicare & Medicaid ($802B or 23% of spending), Social Security ($768B or 22%), Defense Department ($670B or 19%), non-defense discretionary ($615B or 17%), other mandatory ($461B or 13%) and interest ($223B or 6%).
- Non-defense discretionary spending is used to fund the executive departments (e.g., the Department of Education) and independent agencies (e.g., the Environmental Protection Agency), although these do receive a smaller amount of mandatory funding as well.
- Discretionary budget authority is established annually by Congress, as opposed to mandatory spending that is required by laws that span multiple years, such as Social Security or Medicare.
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- As chief legislator, the president shapes policy.
- The legislation empowered the president to sign any spending bill into law while simultaneously striking certain spending items within the bill, particularly any new spending, any amount of discretionary spending, or any new limited tax benefit.
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- Compensation and benefits (C&B) is a subdiscipline of human resources that is focused on policy making for employee compensation and benefits.
- Variable pay—Monetary compensation paid by an employer to an employee on a discretionary basis.