Question

Active changes in tax and spending by government intended to smooth out the business cycle are called ________, and changes in taxes and spending that occur passively over the business cycle are called ________.

Answer 1

The correct answer to the first fill in the blank is discretionary fiscal policy and answer to second fill in the blank is automatic stabilizers.

Step-by-step explanation:

Discretionary fiscal policy is a policy that government uses to change its spending and taxes. The main objective of this policy is expansion or contraction of the economy depending upon the need. This policy is also called demand side policy , which government uses to influence the aggregate demand.

Automatic stabilizers are that type of fiscal policy which are designed in such a way , that it can offset fluctuations in a country's economic activity through the course of their normal operations without any additional authorization needed by government.