1. In an economy with reasonably flexible prices and wages, full employment is almost always maintained. Explain why that statement is true.
2. During the 1980 presidential campaign, Ronald Reagan promised to cut taxes, increase expenditures on national defense, and balance the budget. During the New Hampshire primary of 1980, George Bush called this policy "voodoo economics." The two men were arguing about the relative merits of supply-side economics. Explain their disagreement.