Answer :
Final answer:
Discretionary fiscal policy involves decisions on expenditures or taxes to affect aggregate demand through tools like expansionary or contractionary fiscal policies.
Explanation:
Discretionary fiscal policy allows the government to make decisions on expenditures or taxes to impact aggregate demand. An example of this is an expansionary fiscal policy, where the government could increase spending, reduce taxes, or use a combination of both to shift the aggregate demand curve to the right, aiming for economic growth. On the other hand, a contractionary fiscal policy might involve reducing government spending, increasing taxes, or a mix of both to shift the aggregate demand curve to the left, aiming to control inflation.
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