Suppose that government policymakers are concerned about a forecasted recession. As a consequence, they want to increase spending in the economy by $10 billion and can follow any one of three policies: (1) a $10 billion increase in government purchases of goods and services; (2) a transfer payment increase that would provide funds for households to spend

$10 billion; or (3) a reduction in taxes by an amount that would put $10 billion into spending. Does it make any difference which of these policies is chosen? How would each affect the federal budget? Why might policymakers choose one policy over another?