1. Classify the following items as automatic fiscal policy, discretionary fiscal policy, or not part of fiscal policy.

• A decrease in tax revenues in a recession

• Additional government expenditure to upgrade highways

• An increase in the public education budget

• A cut in infrastructure expenditure during a boom 

2. Explain how aggregate demand changes when government expenditure on national defense increases by $100 billion.

3. Explain how aggregate demand changes when the government increases taxes by $100 billion.

4. Explain how aggregate demand changes when the government increases both expenditure on goods and services and taxes by $100 billion.