Consider the list of situations below faced by an imaginary
country that is suffering an economic crisis. Classify each situation as either a result of discretionary fiscal policy or an automatic stabilizer in the economy.
I. Higher government spending in unemployment benefits due to a rise in the number of unemployed people
II. A decrease in tax collection due to a decrease in business profits
III. Higher public spending due to the introduction of a new emergency credit line for businesses, subsidized by the government
IV. Smaller tax revenue resulting from an increase in the amount of households that fall under the poverty line
V. Smaller tax revenue due to the approval of a bill that provides tax cuts for small businesses
Answer: Situations III and V are discretionary fiscal policy, and I, II and IV are automatic stabilizers