1. Consider 3 policies

            a. a tax cut that will last 2 year

            b. changing the amount withheld from paychecks, but not the tax rates

            c. a permanent tax cut

Order these policies from least to most effective on increasing consumer spending.  Which policy will have the greatest effect on aggregate demand.  Explain.

 

2. Classify the following as automatic stabilizer, discretionary fiscal policy, or not fiscal policy

            a. the federal government increases spending because of the war in Iraq and Afghanistan

            b. the Federal Reserve increases the money supply

            c. during a recession, the total amount the federal government pays out in food stamps and Medicaid increases

            d. congress and the president cut taxes temporarily

            e. during an expansion, the amount of income taxes collected increases

 

3. Identify each of the following as expansionary fiscal policy, contractionary fiscal policy, not fiscal policy

            a. spending on transfer programs is increased

            b. the Federal Reserve increases interest rates

            c. income tax rates are increased

            d. all education expenses are now allowed to be deducted from taxes

            e. corporate tax rates are decreased

            f. spending on building and reinforcing roads and bridges is increased

 

4. Fiscal policy changes automatically when output and employment fluctuate

            a. Explain why tax revenue changes during a recession

            b. Explain why government spending changes during a recession

            c. If the federal government was required to operate under a balanced budget rule, what would it have to do during a recession?  Would that make the recession more or less severe?

 

5. Discuss the role of fiscal policy during the recent recession using the online articles

            a. was monetary or fiscal policy more effective in the recovery? Explain

            b. Explain how automatic stabilizers effected the recovery.

            c. Why has Japan slipped back into recession?

 

6. Using a static AS/AD model, draw what happens to aggregate demand during a recession.  What fiscal policy actions can the government take to combat this?  Draw the effects of these policies on your graph.

 

7. chapter 16 problem 3.4

8. Draw and explain

            a. the tax multiplier

            b. the government purchases multiplier

            c. crowding out

 

9. Explain why congress and the president do not require a balanced budget every year.

 

10. chapter 16 problem 7.4

 

 

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Status NEW Posted 28 May 2017 11:05 AM My Price 8.00

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