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-wind 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 is the 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)