Complete all questions listed below. Clearly label your answers and site all references.


1. Will increases in government spending financed by borrowing help promote a strong recovery from a severe recession. Why or why not?

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2. Does fiscal policy have a strong impact on aggregate demand? Did the shift of the federal budget from deficit to surplus during the 1990s weaken aggregate demand? Did the government spending increases and large budget deficits of 2008–2011 strengthen aggregate demand? Discuss.


3. What is the current rate of unemployment? (See and state the month you are reporting.) How rapidly has GDP grown during the past 3 years? (See and state the annual growth rate for each year.) What do these figures indicate about the validity of the Keynesian view?


4. Are changes in discretionary and fiscal policy likely to be instituted in a manner that will reduce the ups and downs of the business cycle? Why or why not?


* In Question #3, you are asked to go the website which is for the Bureau of Labor Statistics within the U.S. Department of Labor, to find the most recent reading on U.S. unemployment figures. Please report the figure for the U.S. and not for your home state or where you reside. This may sound silly, but it has happened before, so I want to make sure there is no confusion. You will find the latest numbers on the right side of the main page, along with links to more detailed information, which you can view if you please. Please provide in your answer the unemployment percentage and month/year for it.


* Also, in Question #3, you will be asked to visit the website for the U.S. Department of Commerce’s Bureau of Economic Analysis at to determine how rapidly the GDP has grown in the past three years. From the main page for the BEA, click on “Gross Domestic Product (GDP)” in the National menu, and then open the “Percent change from preceding period” Excel sheet. Recommend that you quote both the real (chained 2005 dollars) and nominal rates (current dollars) for annual percent change (not quarterly) for 2010, 2011, and 2012. Note: Please remember to use (-) or (+) to indicate the direction of the percentage change.


* The other questions on the problem set are pretty much self-explanatory as Question #1 is about the opposing views of Keynesian and Neo-classical economics and Questions #2 and #3 are from your textbook.



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