Scenario 2: The government is currently spending three billion, seven hundred million on programs and brings in two billion, nine hundred million through taxation. In addition, the nation
has experienced a period of rising unemployment.
1. Does this create a budget surplus or deficit? Explain.
2. As a member of Congress, what changes would you suggest to fiſcal policy to balance
the budget? Explain at least two ways you would use the tools of fiscal policy to balance
the budget by recommending an "increase" or "decrease" to each tool in your
explanation.
3. What are the benefits and opportunity costs of the changes you propose? Consider the
impact on economic growth, price stability, and unemployment.
4. How might your efforts to balance the budget conflict with efforts to decrease
unemployment, if at all?