Chapter 31: Problem 15
Explain how cuts in funding for programs such as Head Start might affect the development of human capital in the United States.
Chapter 31: Problem 15
Explain how cuts in funding for programs such as Head Start might affect the development of human capital in the United States.
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Get started for freeAssume that the newly independent government of Tanzania employed you in \(1964 .\) Now free from British rule, the Tanzanian parliament has decided that it will spend 10 million shillings on schools, roads, and healthcare for the year. You estimate that the net taxes for the year are eight million shillings. The government will finance the difference by selling 10 -year government bonds at \(12 \%\) interest per year. Parliament must add the interest on outstanding bonds to government expenditure each year. Assume that Parliament places additional taxes to finance this increase in government expenditure so the gap between government spending is always two million. If the school, road, and healthcare budget are unchanged, compute the value of the accumulated debt in 10 years.
Under what condition would crowding out not inhibit long-run economic growth? Under what condition would crowding out impede long-run economic growth?
Explain whether or not you agree with the premise of the Ricardian equivalence theory that rational people might reason: "Well, a higher budget deficit (surplus) means that I'm just going to owe more (less) taxes in the future to pay off all that government borrowing, so I'll start saving (spending) now." Why or why not?
Describe how a plan for reducing the government deficit might affect a college student, a young professional, and a middle-income family.
Under what conditions will a larger budget deficit cause a trade deficit?
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