1. Which one of the following is not an example of expansionary fiscal policy?

	a.	Increasing government spending on unemployment insurance
	b.	Decreasing government spending on education
	c.	Decreasing federal income tax rates
	d.	Increasing government spending on the military
	e.	Decreasing local property taxes

2. In recessions, tax revenues tend to decline and transfer payments like unemployment insurance and food stamps tend to increase, so these programs...

	a.	increase unemployment.
	b.	create budget surpluses during economic downturns.
	c.	are procyclical.
	d.	None of the above
	e.	are automatic stabilizers.

3. Suppose that the behavior of households and firms in an economy is determined by the following equations

C=25+0.9Y_d, I_I = 60, G = 80, T = 60, TR=10.

a. Calculate an expression for aggregate demand as a function of income (please enter your answer in the form: AD = a + bY).

b. Calculate the equilibrium level of output (please just enter the numeric value of output). Y=

c. Now assume that the government decides to simultaneously increase government spending and taxes by 50 (G'=130 and T'=110). Calculate the new expression for aggregate demand.

d. Calculate the new equilibrium level of output. Y'=

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