Question

1) give 2 examples of expansionary fiscal policy, what are its economic goals?

2) give 2 examples of contractionary fiscal policy, what will be the effect on government surplus/deficit

3)under a particular tax sysem, the government

collects 80 billion in tax revenues when gdp is 800 million and 88 billion when gdp is 900 billion. is this tax systems regressive, propotional or progressive

4) in year 1 the full employment budget showed a deficit of 100 billion and the actual budget showed a 150 billion deficit. in year 2, the full employment budget showed a deficit of 125 billion and the actual budget showed a deficit of 175 billion. based on the data, what can be concluded about the direction of fiscal policy and the preformance of the economy between years 1 and 2?

Answer 1

Part a)The two major examples of expansionary fiscal policy are tax cuts and increased government spending. Both of these policies are intended to increase aggregate demand while contributing to deficits or drawing down of budget surpluses

Part b)engage in contractionary fiscal policy by raising taxes or reducing government spending. In their crudest form, these policies siphon money from the private economy, with hopes of slowing down unsustainable production or lowering asset prices. The objective of the policy is to control inflation

Part c(3)under a particular tax sysem, the governmentcollects 80 billion in tax revenues when gdp is 800 million and 88 billion when gdp is 900 billion. This is progressive tax systems.