Consider the difficult task of raising children. One of the most widely recognized challenges of this task is to properly balance rules and ad-hoc decisions. Constantly breaking rules might send the wrong message to a kid, while strictly enforcing rules every time might result in excessive punishments. The debate about the conduct of macroeconomic policy is not significantly different from this example.

a) Comment on the American Recovery and Reinvestment Act of 2009. Can this Act be characterized as discretionary policy?

b) Is it possible for this set of policies to affect the incentives of financial intermediaries or other major economic agents?