1. A left-wing peace-loving president takes office and slashes defense spending with a 300 reduction in gov. purchases and at the same time raises taxes by 200 and transfers by 300. Is the combined effect to the economy positive or negative? (MPS=.25)

2. By how much?

3. How are you sure?

4. How much is the change to government debt?

5. If you can change one item (G,T,transfers) to make the net effect zero to economy, you would make . . .(unique answer please)

6. A right-wing bellicose president takes office promising to rebuild the military with a +400 increase in gov. purchases and at the same time slashes taxes by 300 and transfers by 500. Is the combined effect to the economy positive or negative? (MPS=.25)

7. By how much?

8. How are you sure?

9.How much isthe change to government debt?

10. If you can change one item (G,T,transfers) to make the net effect zero to economy, you would make . . .(unique answer please)

Something I reaffirmed to myself for this section is that when government changes taxes and transfers,not only is spending changed but also savings and this is why taxes &transfers have a lesser impact on the economy than G(overnment) spending. This is why the T multiplier is MPC/MPS and cycle #2 = cycle #1 *MPC*MPC for taxes and transfers.