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13 May, 2015 - 10:20

Nondiscretionary fiscal policy refers to various ongoing programs of government spending and taxation. These are primarily for income maintenance purpose. They are usually rarely changed. They include social security, welfare and unemployment compensation.

The payment of unemployment benefits is a typical example of nondiscretionary fiscal policy. The payments necessarily increase when the number of unemployed increases, and that is during an economic slow down. The payments necessarily decrease when the unemployed return to work with an economic recovery.