Reference no: EM132410208

Assignment: 1. Choose one of the discussion questions below to focus on for your discussion contribution.

2. Once you have completed your initial post (2-3 paragraphs), read and respond to the posts of at least 2 of your peers.

3. Your initial post and your peer responses should be substantial and original. Clearly cite any outside sources incorporated in to your original thoughts using MLA. For questions, reference the MLA guidelines.

Discussion questions:

1. The economy is in a substantial recessionary gap. In order to fight the recessionary gap, the government decides to employ expansionary fiscal policy. Spherically, the government borrows $400 billion to build a new system of interstate highways. Answer the following regarding potential government choices and the ramifications.

• Consider a Classical graph of a Recessionary gap. Will this expansionary fiscal policy have a direct impact on SRAS or AD? Explain how this policy will "fix" this recessionary gap.

• As a result of these policies, what will happen to the price level? Briefly explain.

• Will this spending cause indirect crowding out? Will it cause direct crowding out? Explain.

• I'm thinking about borrowing money to buy a car. What can I expect will happen to the interest rates on car loans after the expansionary policy takes place?

2. Answer the following questions regarding taxes.

• The Georgia state government currently levies a 4% sales tax on most purchases of consumer goods and services. Do you think this sales tax progressive, regressive, or proportional? Explain your logic.

• Lucy currently earns $72,000 and pays $17,000 in federal income taxes. Simon earns $110,000 per year and pays $20,000 in income taxes. Based on this small amount of information, is this tax system progressive, regressive, or proportional?

• Imagine that the current unemployment rate is 2.1%. Would this be a reasonable time to raise taxes? Explain.