Question 1

What are government's fiscal policy options for ending severe demand-pull inflation?Use the aggregate demand-aggregate supply model to show the impact of these policies on the price level.Which of these fiscal policy options do you think might be favored by a person who wants to preserve the size of government?A person who thinks the public sector is too large?

Question 2

Explain how built-in (or automatic) stabilizers work.What are the differences betweenproportional, progressive, and regressive tax systems as they relate to an economy's built-in stability?