1. The economy is in recession, the recessionary gap is large, and there is a federal government budget deficit. Can you determine whether the budget deficit is structural or cyclical?

2. What happens to the demand for loanable funds and the real interest rate when debt-financed government spending increases? What is an automatic fiscal policy? 4. Under current policies, one projection indicates that Brazil's public debt will reach 250% of GDP in 30 years and 500% in 50 years. What could the Brazilian government do to reduce the fiscal imbalance? 5. The government is considering increasing the tax rate on income generated from labor. If this action is taken, what effect would it have on labor demand and why? 6. If in a given country investment is $0.8 billion, savings is $.9 billion, government spending is $1.1 billion, exports are $2.8 billion, and imports are $1.5 billion, how much is the balance of the government budget? What is the effect of a tax on income generated by labor (wages)? Explain this effect in terms of how it affects aggregate supply. 8. How is the cyclical deficit or surplus calculated? 9. What is meant by the term tax revenue? 10. The government is considering increasing the tax rate on income generated from labor. If this action is taken, what effect would it have on the after-tax equilibrium wage and why?

11. If an income tax is placed on income, what happens to the labor supply? 12. The economy is in recession and the recessionary gap is large. What fiscal and automatic policy actions could be implemented?

13. What is a discretionary fiscal policy? 14. The government is considering increasing the tax rate on earned income. If this action is taken, what effect would it have on the equilibrium level of employment and why? 15. What is generational accounting? 16. According to the federal budget, what are the 3 categories into which expenditures can be classified? 17. What is government debt? 18. What is the effect of a tax on income generated by capital (interest)? Explain this effect in terms of how it affects aggregate supply. 19. What is the concept of federal budget spending called "transfers"? 20. The economy is in recession, the recessionary gap is large, and there is a federal government budget deficit. Explain how automatic fiscal policy changes the output gap.