To address a recessionary gap, discretionary fiscal policy involves deliberate changes in government spending or tax policies aimed at stimulating economic activity. Among the options provided, option A – a tax decrease passed into law by Congress, is a clear example of discretionary fiscal policy.
The rationale behind this is that reducing taxes puts more money in the hands of consumers and businesses, encouraging them to spend and invest more, which can help boost economic growth and close the recessionary gap. On the other hand, option B – an agreement among major banks to raise interest rates, does not represent fiscal policy at all; rather, it relates to monetary policy, which is controlled by a central bank and not legislative action.