If the government increased defense spending by $1 million and laid off enough Justice Department employees to decrease the Department of Justice budget by $1 million, which of the following is the likely net effect?
A) an increase in the budget deficit and transfer payments
B) an increase in the budget deficit and net taxes
C) a decrease in the budget deficit and government spending
D) no change in the budget deficit because there is no net change in government spending
E) no change in the budget deficit because neither defense spending nor the spending on the Department of Justice is included in government spending

Question

Quizplus · Accepted Answer

The budget deficit would not change because the increase in defense spending is offset by the decrease in spending on the Department of Justice, resulting in no net change in total government spending.

If the Government Increased Defense Spending by $1 Million and Laid