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1. Explain how federal income tax can be automatic stabilizer. Q.2. What is the difference between recessionary and expansionary gaps. Explain with the help of
1. Explain how federal income tax can be automatic stabilizer. Q.2. What is the difference between recessionary and expansionary gaps. Explain with the help of the diagram how these gaps can be closed? Q.3. Explain how classical economists differ from John Maynard Keynes in closing recessionary and expansionary gaps. Q.4. How automatic stabilizer smooth out fluctuations in business cycle? Q.5. Determine whether each of the following would make fiscal policy more effective or less effective with proper reasons. a. An increase in the marginal propensity of consume. b. Shorter lags in the effect of fiscal policy. c. Consumers are more response to current income than about permanent income. d. Inadequate measurement of the natural rate of unemployment
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