Question: 1. As it relates to aggregate demand and short-term aggregate supply... a. Graphically show how the government can engage in expansionary fiscal policy when current

1. As it relates to aggregate demand and short-term aggregate supply... a. Graphically show how the government can engage in expansionary fiscal policy when current GDP is less than potential GDP. What is one potential policy action they could take? b. Graphically show how the government can engage in expansionary fiscal policy when current GDP is greater than potential GDP. What is one potential policy action they could take? 2. As it relates to the federal budget a. Give some examples of mandatory spending. b. Give some examples of discretionary spending c. What happens when spending is greater than tax revenue? 3. According to basic economic theory, tax cuts increase aggregate demand and ultimate increase GDP.

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