1. What is the difference between government expenditures and government purchases? How do the two variables differ in terms of their effect on GDP?

2. Federally funded student aid programs generally reduce benefits by $1 for every $1 that recipients earn. Do such programs represent government purchases or transfer payments? Are they automatic stabilizers?

3. Crowding out reduces the degree to which a change in government purchases influences the level of economic activity. Is it a form of automatic stabilizer?

4. Why is it important to try to determine the size of the fiscal policy multiplier?

5. Suppose an economy has an inflationary gap. How does the government’s actual budget deficit or surplus compare to the deficit or surplus it would have at potential output?