https://www.youtube.com/watch?v=WjLePKFnM8s&t=4s

1. If inflation is a major issue in the economy, what would be the correct fiscal policy response from an economic perspective? Why would members of Congress be unlikely to support such actions?

2. Explain how fiscal policy can be used to close the (a) Recessionary gap and (b) inflationary gap

3. Why does a larger government budget deficit increase the magnitude of the crowding-out effect?

4. Explain the effects of the following actions on total spending (Assume that the marginal propensity to consume is 0.9).

a. Government purchases rise by $70 billion.

b. Taxes fall by $70 billion.

Useful videos: https://youtu.be/WjLePKFnM8s (fiscal polity). https://youtu.be/Xg-0z5RWbAU (calculating MPC and MPS and multiplier). https://youtu.be/CNpwEGCqD8c (multiplier effect) https://youtu.be/lShcx6hLy24 Multiplier effect