1. Suppose a government runs a contractionary fiscal policy in order to moderate the effects of a mining boom. These results in a budget surplus. Explain whether the government should use the surplus to retire government debt, provide a tax cut or leave the surplus revenue in a fund.

2. Explain how the banking system contributes to the money supply.

3. Compare the net exports effect of an expansionary fiscal policy and an expansionary monetary policy. In your answer, clearly explain the reason for the difference (if any) between the effects.