ECO 202 Mod 2 Case
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Fiscal Policy
Case Assignment
Submit a 4- to 5-page paper that addresses the following
questions. Be sure to use references within the paper to support your answers.
Show work for all calculations. 1.According to Okun's Law, if the normal rate
of growth of GDP is 3% and the current unemployment rate is 6%, an increase in
GDP growth to 4% would cause unemployment to change by what percentage? 2.When
total output, income, employment, and trade decline for 6 to 12 months, the
economy is in what part of the business cycle? 3.Which has a larger effect on
aggregate demand: an increase in government expenditure or an equal sized
decrease in taxes? Explain your answer. 4.To eliminate a recessionary gap, what
fiscal policy should the government pursue? Be specific. 5.Indicate which of
the following is expansionary OR contractionary fiscal policy:
•Increasing income tax •Bailing out the auto industry •The
purchase of military helicopters
Assignment Expectations
Use concepts from the modular background readings as well as any
good-quality resources you can find. Be sure to cite all sources within the
text and provide a reference list at the end of the paper.
Length: 4–5 pages double-spaced and typed.
The following items will be assessed in particular: •Your
ability to understand an application of fiscal policy. •Some in-text references
to the modular background material (APA formatting recommended). •The essay
should address each element of the assignment. Remember to support your answers
with solid references including the case readings.
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