2a. Given that the economy has moved from A to B what would be the appropriate fiscal policy to achieve potential GDP and why?
2b. If fiscal policy is successful at moving the economy from point B to equilibrium at potential GDP, what happens to unemployment and what impact will this have on the government’s budget?
- Identify each of the following as (i) part of an expansionary fiscal policy, (ii) part of a contractionary fiscal policy, or (iii) not part of fiscal policy.
3a. The personal income tax rate is lowered.
3b. The government increases spending on defence due to a change in spending priorities.
3c. The company income tax rate is lowered.
3d. The State of New South Wales builds a new tollway in an attempt to expand employment and ease traffic congestion.
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