Question: Assume the government was paying 500,000 people an average of $10,000 per year for unemployment benefits.
(A) Under the new regime to end welfare, all these people are hired by the government to perform various tasks, such as serving lunch in the Congressional dining rooms. What happens to GDP, wages and salaries, personal income, personal saving, and national saving?
(B) Under an alternative scheme to end welfare, all these people are required to find jobs in the private sector, and all are successful. What happens to GDP, wages and salaries, personal income, personal saving, and national saving? Assume these people are paid their marginal product, so profits do not change.