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KEYECO-201 MacroeconomicsLesson 12 – Fiscal PolicyWeek 9A4 short-answer questions @ 5-points4 M/C questions @ 1-points eachMacroeconomics, 2ndEdition1.For Discussion-page 263:What is the difference between government expenditures andgovernment purchases? How do the two-variables differ in terms oftheir effect on GDP?Governmentexpenditures encompass all federal spending, includingtransfer payments and government purchases.Government purchases include only purchases of goods and services.Government purchases are a part of GDP; transfer payments are not. Thiscomponent of government spending affects GDP only when the fundsreceived as transfer payments are spent to purchase goods and services.2.For Discussion –page 263Federally funded student aid programs generally reduce benefits by $1for every $1 that recipients earn. Do such programs representpurchases or transfer payments? Are they automatic stabilizers?