Discretionary fiscal policy is:

A. The deliberate manipulation of government purchases, transfer payments, and taxes to promote macroeconomic goals.

B. Revenue and spending programs in the federal budget that automatically adjust with the ups and downs of the economy.

C. Emergency manipulation of government purchases, transfer payments, and taxes to promote macroeconomic goals.

D. Revenue and spending programs in the federal budget that never adjust with the ups and downs of the economy.

E. Monetary policy changes.

Discretionary fiscal policy refers to intentional government action to manage the economy through changing taxation or spending. However, it is often viewed as a blunt instrument due to potential drawbacks, and automatic stabilizers are often preferred for less severe economic situations.

Explanation:

Discretionary fiscal policy refers to the deliberate manipulation of government purchases, transfer payments, and taxes by the government to achieve macroeconomic goals. It differs from automatic stabilizers, which shift in response to economic events without requiring new legislation. When the government enacts changes in taxation or spending in response to economic events, this is an example of discretionary fiscal policy.

However, this approach has its drawbacks, including delays in implementation, potential impact on interest rates, and the inherently political nature of fiscal policy. For these reasons, discretionary fiscal policy is often deemed a 'blunt instrument' and reserved for extreme situations. In less severe scenarios, it's often more effective to let fiscal policy operate through automatic stabilizers and focus on monetary policy for short-term countercyclical efforts.

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