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If investment falls, government spending can be raised so that autonomous expenditure and equilibrium income remain the same. This deliberate action to stabilise the economy is often referred to as:

Solution

✅ Correct Option: 4

Automatic stabilisers work on their own without fresh government decisions. A deliberate change in government spending or taxes, made consciously to offset a fall in investment and keep equilibrium income unchanged, is called discretionary fiscal policy.

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