Assume the government wants to increase GDP and income Y. It has $100 million to use.

Assume the government wants to increase GDP and income Y. It has $100 million to use. Explain why spending it on roads and bridges (government spending G) will increase Y more or less than if it used the money on transfer payments (R) such as welfare payments. You must refer to the multiplier and mathematically why one policy would be different from the other. Explain why one policy would work better than the other.

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