Problem 1) What did classical economists assume about flexibility of prices, wages and interest rates? What did this assumption imply about the self correcting tendencies in an economy recession? What disagreements did Keynes have with classical economists? (evolution of fiscal policy)
Problem 2) Increased government purchases with taxes held constant can eliminate a recessionary gap. How could tax cuts achieve the same result?
Problem 3) Why does the budget require a forecast of the economy? Under what circumstances would actual government spending and tax revenue fail to match the budget as approved? (federal budget cuts)
Problem 4) What has happened to the federal debt since 2008 as measured relative to GDP? (federal debt)