What kind of fiscal policy, expansionary or contractionary, will be appropriate to achieve the economic goals given by the Congress if the economy is as shown in the graph above? (Hint: Think first what kind of problem this economy is facing) b. To adopt this fiscal policy, how would policy makers aim to increase or decrease government spending and tax revenues? 2. Progressive income tax structure and unemployment compensation work as automatic stabilizers. If the economy is slowing down and is in the recessionary gap, a. Would these automatic stabilizers increase or decrease transfer payments such as unemployment and other welfare benefits? b. What will be the cause of this change? c. Would these automatic stabilizers increase or decrease tax revenues? d. What will be the cause of this change? Price level Q1 QN RGDP AD1 SRAS1 LRAS AD2