1. According to the Keynesian model, what are the two components of consumption spending? What factors determine how consumption changes when real disposable income changes? Explain.
2. Suppose that the government pursues expansionary fiscal policy by lowering taxes. What are the expected demand-side effects? What are the possible offsets to the demand-side effect? How might supply-side effects change these results?
3. Explain the differences between the public debt and the government budget deficit. Explain how deficit spending could be a burden to future generations.
4. What are the direct and indirect effects of an increase in the money supply?
5. What are the effects of a tariff on a good?