1. During an economic contraction, why is it likely that the federal government budget will move into deficit?

2. Identify and discuss whether each of the following is: an expansionary fiscal policy; a contractionary fiscal policy; or not a fiscal policy.

i. The personal income tax rate is lowered.

ii. The government increases spending on defence due to a change in spending priorities.

iii. The company income tax rate is lowered.

iv. New South Wales builds a new tollway to expand employment and ease traffic congestion.