Question: QUESTION TWO [40] 2.1 Question 2.1.1 and 2.1.2 is based on the statement below: A fiscal action initiated by an act of Parliament is called

QUESTION TWO [40] 2.1 Question 2.1.1 and 2.1.2 is based on the statement below: A fiscal action initiated by an act of Parliament is called discretionary fiscal policy. It requires a change in a spending programme or in a tax law. If real gross domestic product (GDP) is below potential GDP, discretionary fiscal policy might be used in an attempt to restore full employment. 2.1.1 In terms of the above statement explain the type of discretionary fiscal policy the government of an economy will implement in order to restore full employment. Choose from the ONE correct diagram below to substantiate your answer. (14)

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