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In this lecture, we will add government to our picture of the economy. We will examine how changes in government spending and taxing policies can influence the economy. Upon completion of this lecture, you should understand and be able to answer these key questions: 1. When you get your paycheck, what is left over after the government takes out its various taxes? 2. How can the government pull the economy out of a recession? 3. If the government increases spending in order to stimulate the economy, how much will the economy grow? 4. There has been a lot of talk about cutting taxes lately. How will tax cuts affect the state of the economy? 5. There has also been a lot of talk about keeping the federal budget balanced. How can the government try to prevent a recession, while trying to maintain a balanced budget? 6. What is the federal deficit? How does it differ from the national debt? 7. What was the federal budget situation in the past few years?
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