Fiscal Policy and Graphing Practice

a. Explain the difference between discretionary and non-discretionary fiscal policy and the different between expansionary and contractionary fiscal policy. Give examples of each.

b. Draw two graphs with one showing a recessionary gap and the other showing an inflationary gap. Explain how fiscal policy can be used to close each gap and show the effects of fiscal policy on the graphs.

c. Draw another set of graphs showing recessionary gap and an inflationary gap. Explain what happens to both graphs in the long run without government intervention and show what happens on the graphs.