The AD/AS model and fiscal policy

a.) The Federal Treasurer's annual May Budget is a statement of fiscal policy. In May 2018, the Budget statement included a heading for policy outline "Tax relief to encourage and reward working Australians".

(i) What type of federal budget does this suggest the Government is pursuing?

(ii) Use a correctly labelled diagram to demonstrate the effect of this budget. Explain.

(iii) Explain the difference between discretionary fiscal policy and automatic stabilizers.

b) 'Our fiscal policy was unsuccessful', an economic analyst says, 'due to partisan bickering in the parliament that delayed the passing of the appropriate measures and failure to realise we were headed into recession until it was too later'. What type of lags is the analyst describing? Explain your answer.

c.) If potential GDP equals $2000 billion and actual GDP is $1700 billion, how much will the government have to increase government spending (G) to reach potential GDP? (Assume the mpc = 0.75). Show your workings.