Chapter 11. Fiscal Policy and the Federal Budget: Pre - Class & In - Class Activities Packet Name/I.D. Number: Section: Date: Part 3. Discussion Questions and Problems 1. The bulk of federal government expenditures go for four programs. What are they? 2. What percentage of total income did the top 5 % of income earners earn in 2014? What percentage of federal income taxes did this group pay 2014? 3. A progressive income tax always raises more revenue than a proportional income tax. Do you agree or disagree? Explain your answer. 4. What is the difference between a structural deficit and a cyclical deficit? 5. What is the difference between discretionary fiscal policy and automatic fiscal policy? 6. Explain two ways crowding out may occur. 7. Some economists argue for the use of fiscal policy to solve economic problems; others argue against it. What are some of the arguments on both sides? 8. Explain how expansionary fiscal policy can, under certain conditions, destabilize the economy. 9. Identify and explain the five lags associated with fiscal policy 10. The economy is in a recessionary gap, both Smith & Jones advocate expansionary fiscal policy. Does it follow that both favor so-called big government? 11. What is the difference between a marginal tax rate and an average tax rate 12. Will tax revenue necessarily rise if tax rates are lowered? Explain your