1. Explain how the budget deficit affects the economy in the short run and in the long run.
2. Identify whether each of the following government expenditures is a payment for goods and services or a transfer payment. (LO11-1) a) A local public school hires a new teacher. b) Medicare pays for a knee replacement for a 66-year-old. c) A poor family gets food stamps. d) The local Social Security office buys a new computer.
3. Suppose the job multiplier is 0.7. The government hires 2,000 workers. a) How much does total employment rise or fall? b) How much does private-sector employment rise or fall? c) Would you regard this outcome as a success?