In the News: Stimulus: Spend or Cut Taxes? Most Economists Agree That Both Are Needed. The Debate Comes When They Ask How to Split It. New York (Fortune-As President-elect Barack Obama prepares to take office, the incoming administration and Congress continue to shape a massive stimulus package to help the struggling economy While the final breakdown of the package remains to be seen, much of the debate centers on the effectiveness of government spending versus tax cuts as means of reviving the economy. Currently the plan includes roughly $550 billion in spending and $275 billion in tax cuts Most economists support the emphasis on spending, saying government expenditure does more to boost gross domestic product, a key indicator of fiscal health In other words, spending delivers more bang for the buck because each dollar paid to a worker building a wind turbine, for example, is then spent on groceries or clothing, causing a fiscal ripple effect. Conversely, a worker might save a third of the money he is given in a tax cut, with some of the spending going toward imports, which would also reduce the stimulus to GDP According to a January 6 study by Mark Zandi, chief economist at Moody's Economy.com, GDP grows by S1.59 for every dollar spent on infrastructure, while the increase from a corporate tax cut is only $0.30 Based on Zandi's study, some of the most efficient ways to spend government money are temporarily increasing food stamps (a $1.73 GDP increase per dollar), extending unemployment benefits ($1.63) increasing infrastructure spending ($1.59), and upping direct aid to financially strapped states ($1.38) Some research shows the positive effect of tax cuts on GDP gets short shrift. Christina Romer, who studied the subject while a professor at the University of California, Berkeley- and whom Obama chose as Chairwoman of his Council of Economic Advisers-says don't underestimate them as an effective means of stimulating the economy Alyssa Abkowitz and Lawrence Delevingne

What is the implied value of the multiplier for Instructions: Enter your responses rounded to two decimal places

(a) Increased unemployment benefits?

(b) Infrastructure