Discretionary stabilisers

Question 1

Discretionary stabilisers

Answer 1

Discretionary stabilisers in the budget are deliberate decisions by the Treasurer to alter tax rates or budget outlays.

Sometimes introduced when automatic stabilisers are not enough to deal with prolonged recessions or booms.

Question 2

discretionary stabilisers in influencing aggregate demand and stabilising the business cycle

Answer 2

For example, in times of low economic growth, company tax rates may be implemented in order to stabilise the low AD. This is a structural change implemented through the budget which means that firms will have more disposable income, therefore a greater incentive to expand their business, which boosts the private investment expenditure component of AD and therefore helps to stabilise aggregate demand.