Reference no: EM132405931

1. Give a brief definition of fiscal policy? What are its economic goals?

2. What is the Council of Economic Advisers?

3. Explain the effect of a discretionary cut in taxes of $40 billion on the economy when the economy's marginal propensity to consume is .75. How does this discretionary fiscal policy differ from a discretionary increase in government spending of $40 billion?

4. Explain the effect of a discretionary increase in government spending of $50 billion on the economy when the economy's marginal propensity to consume is .75.

5. Explain the aspects of expansionary and contractionary fiscal policy. During which phases of the business cycle would each be appropriate?

6. Differentiate between discretionary fiscal policy and nondiscretionary or built-in stabilization policy.

7. Comment on the statement: "Increasing government spending is preferred to a cut in taxes when the U.S. government seeks to fight a recession."

8. Explain what is meant by a built-in stabilizer and give two examples.

9. "The more progressive a tax system, the greater is the economy's built-in stability." Explain this statement for both recessionary and peak phases of the business cycle.

10. Explain how the below graph illustrates the built-in stability of a progressive tax structure.