5. Final Exam Fiscal Policy Solutions

Q 4 S gov Tax Revenue Government Expenditure Transfers 250 bm 2456 In 5 bln It's positive Government is running budget surplus Q 5 LEAS stats note that Price level AD CITE TNX D oh And Gt PAD CITING TNX AD Increase In government Ado expenditure will RGDP Shift AD to the right As a result of this fiscal policy newer'm C will be reached DO

I 6 Ls note that LEAS AD CITE TNX Price level SEAS And IG B HAD It Itp tnx A AD Decrease in government Ado expenditure will Ropp shift AD to the left As a result of this fiscal policy newer'm A will be reached Q 7 Ls note that AD CITE TNX And increase in taxes reduces the disposable LRAS income of consumers Price level SEAS L As a result Ct B HAD It G tnx A AD Increase in taxes reduces consumption will A Do Ropp Shift AD to the left As a result of this fiscal policy newer'm A will be reached

Q I note that LEAS AD CITGTNX Price level Stats And PG B TAD CITING TNX A AD Increase in government Ado expenditure will Ropp shift AD to the right As a result of this fiscal policy newer'm B will be reached OHIO LEAS At point B economy Price level is producing an output stats larger than the potential GDP B A To move the economy AD back to potential GDP AD Government can either RGDP Decrease exp Gt Inreate taxes Tax