1.University of Chicago economist Harald Uhlig found that every dollar the government spends leads to a decrease in the GDP by $_____(see your book).Hayek would _______ with this conclusion because:

a.$1.81; Disagree; it has been proven that government spending during World War II led to an increase in GDP and the end of the Great Depression.

b.$3.40; agree; for every dollar the government spends it starts with taking a dollar out of the private economy where the multiplier effect is greater than the Keynesian multiplier.

c.$.92; agree; there are significant lag effects, along with the pressure to engage in PORK spending when politicians fight recessions with more spending.

d.$5.18; disagree; during severe recessions there is the problem of downward-wage rigidity which renders the self-correcting mechanism of the Classical school useless.