1. Explain the diference between a surplus, a deficit, and a debt in relation to government fiscal budgeting. (6 marks) 2. The federal government introduces the appropriate fiscal policies to deal with a recession. Identify the fiscal policies it would use. Use an aggregate supply and demand curve diagram to explain what would happen to the three main economic measures if time lags caused the fiscal policy to take hold after the recession had already corrected itself back to a level of full employment. (16 marks). 3. One of the dangers of using expansionary fiscal policy is that it can cause inflation. Referring to government spending and taxation decisions, aggregate supply and demand curves, and the GDP equation, explain the circumstances under which expansionary fiscal policy is likely to cause significant inflation. (16 marks) 4. Explain, using appropriate diagrams, what might happen to the Canadian economy if the government predicts a recession and uses the appropriate fiscal policies, but errs in its prediction. (It should have predicted a strong inflationary period.) (16 marks ) 5. During the Great Depression, the Canadian government raised income and corporate taxes in an attempt to maintain a balanced budget, Refering to the concepts of Keynesian economics, aggregate supply and demand analysis, and leakages and injections, explain the impact of the government's actions on the Canadian economy. (16 marks) 6. Over the past year the unemployment rate has risen from 7 per cent to 9 per cent, the GDP growth rate has dropped from 3.5 per cent to 1 per cent, and the inflation rate has dropped from 3 per cent to less than 1 per cent. As an economist for the government, what advice would you give to the minister of finance, who is attempting to lead the economy with only fiscal policies at her disposal? in your answer you should refer to aggregate supply and demand, the GDP equation, the multiplier, and discretionary fiscal policies. (16 marks) 7. Over the past year the unemployment rate has dropped from 8 per cent to 6 per cent, the GDP growth rate has increased from 2 per cant to 4 per cent, and the inflation rate has increased from 2 per cent to 5 per cent. As an economist for the government, what advice would you give to the minister of finance, who is attempting to lead the economy with only fiscal policies at his disposal? In your answer you should refer to aggregate supply and demand, the GDP equation, the multiplier, and discretionary fiscal policies. (16 marks) 8. Using two specific examples, explain how automatic stabizers act to restrain the market forces that act on aggregate demand in either a recessionary or an inflationary period of the business cycle. (16 marks)