Which of the following is/are true?
a) When government is trying to increase output and employment it will end up having a fiscal surplus.
b) Government spending directly affects total spending whereas taxes enter the multiplier process through their impact on disposable income.
c) The deliberate action to stabilise the economy is often referred to as discretionary fiscal policy.

b and c

The correct answer is Option 3: b and c

Let's evaluate each statement:

a) When government is trying to increase output and employment it will end up having a fiscal surplus. This statement is generally false. When the government aims to increase output and employment, it often increases spending or cuts taxes, which typically leads to a fiscal deficit rather than a surplus. A fiscal surplus occurs when government revenue exceeds government spending, which is not usually the case when trying to boost output and employment.

b) Government spending directly affects total spending whereas taxes enter the multiplier process through their impact on disposable income. This statement is true. Government spending has a direct impact on aggregate demand because it injects money into the economy. Taxes affect disposable income and therefore influence consumption, which indirectly affects aggregate demand through the multiplier process.

c) The deliberate action to stabilise the economy is often referred to as discretionary fiscal policy. This statement is true. Discretionary fiscal policy involves deliberate changes in government spending and taxation to stabilize the economy and achieve macroeconomic goals like controlling inflation, reducing unemployment, and stimulating economic growth.