1. Imagine an economy in which Ricardian equivalence holds. The economy has a budget of 50, a trade deficit of 20, private savings of 130, and investment of 100. If the budget deficit rises to 70, how are the other terms in the national saving and investment identity affected?
2. What are some ways fiscal policy might encourage economic growth?
3. Explain how decreased domestic investments that occur due to a budget deficit will affect future economic growth.
4. Explain how a shift from a government budget deficit to a budget surplus might affect the exchange rate.
5. What are the different policy tools for dealing with cyclical unemployment?