On the other hand, the discretionary policy takes a long period for the implementation of the policy and the effects to be felt in an economy. TimeframeĪutomatic stabilizers respond immediately to an economic fluctuation. While automatic stabilizers do not need additional authorization from policymakers or the government, the discretionary policy is based on ad hoc judgement of policymakers as opposed to predetermined rules. On the other hand, the discretionary policy refers to an economic policy change in taxes or government spending that aims to stabilize the economy. Both are policies that aim at stabilizing economies during fluctuationsĭifferences between Automatic stabilizers and Discretionary policy DefinitionĪutomatic stabilizers refer to a fiscal policy that aims to balance fluctuations in an economy via their normal operations as opposed to additional authorization by policymakers or the government.Similarities between Automatic stabilizers and Discretionary policy It can lead to fewer private investments as a result of excessive government borrowing.Since higher incomes cause an increase in expenditure and a fall in the trade balance, it can cause a higher trade deficit.It is difficult to implement since major economic sectors cannot survive with spending cuts. ![]() This leads to a rise in expenditure and a fall in taxes. ![]()
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