Please type all the answers 25 shortly thank you 2 What is t

Please type all the answers #2-#5 shortly, thank you.

2) What is the difference between federal purchases and federal expenditures? 3) Give an example of an automatic stabilizer. Explain how automatic stabilizers work in the case of recession. 4) How does expansionary monetary policy increase spending in the economy compared to how expansionary fiscal policy increases spending in the economy? 5) Identify each of the following as (i) part of an expansionary fiscal policy, (ii) part of a contractionary fiscal policy, or (iii) not part of fiscal policy. a. The personal income tax rate is lowered. b. Congress cuts spending on defense. c. College students are allowed to deduct tuition costs from their federal income taxes. d. The corporate income tax rate is lowered. e. The state of Nevada builds a new tollway in an attempt to expand employment and ease traffic in Las Vegas.

Solution

Answer 2 : Federal purchases means that when government spending money they received goods and services in return where as federal expenditure means that their include transfer payment given to another person.In this expenditure no goods or services has been received.example : Pension

Answer 3 : Automatic stabilizer means spending of the government and taxes that automatic rises or fall along with business cycle. Example : Unemployment insurance

During recession period , government spending automatic rises, which increases aggregate demand and offset decreases in consumer spending.

Answer 4 : Expansionary Monetary policy is when a central bank used a tool to stimulate the economy. It increases money supply , lower interest rate and increases AD . It lowers the value of currency where as expansionary fiscal policy is the government policy which will lead to increase real interest rate and decreases in investment.

Answer 5 : a) It is a case of expansionary fiscal policy as government reduced taxes.

B) It is a case of Contraction fiscal policy where government reduced spending

C) It is not part of fiscal policy

D) It is case of expansionary fiscal policy

E) It is case of Contraction fiscal policy