What type of fiscal policy is undertaken voluntarily by the government related to changing taxation and spending?

The choice of discretionary fiscal policy is correct because it refers to the active measures taken by the government to influence the economy through changes in taxation and public spending. Discretionary fiscal policy is characterized by deliberate decisions made by lawmakers and policymakers in response to economic conditions to either stimulate growth or address negative economic trends.

For instance, if a government decides to increase spending on infrastructure projects or cut taxes to spur economic activity, these actions reflect discretionary fiscal policy. It contrasts with mandatory fiscal policies, which are predefined by existing laws and do not require new legislation for implementation, such as entitlement programs like Social Security.

Discretionary policies can also be expansionary or contractionary, depending on whether they aim to boost the economy or reduce inflation. However, the key aspect of discretionary fiscal policy is the voluntary and situational nature of its implementation, as opposed to mandatory provisions that are already established.