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Federally funded student aid programs generally reduce benefits by $1 for every $1 that recipients earn....

Federally funded student aid programs generally reduce benefits by $1 for every $1 that recipients earn. Do such programs represent government purchases or transfer payments? Are they automatic stabilizers?

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Answer #1

This is the programme for student aid, and it is considered as the transfer payments.

The transfer payment falls when the GDP increases. It is because the increase in economic activity will create more employment opportunities for the students. So this spending falls, and GDP rises, and it is considered as automatic stabilizers.

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