IBE316final - IBE316:EconomicPolicy Final Name: ID:

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
IBE316: Economic Policy Final Name: ID: Question 1. Short Answer Questions a. Why is the government cost benefit analysis more complicated than the private cost  benefit analysis? Because the government deals with none monetized costs and benefits.  Also, the government might discount the future at a different rate than the  private borrowing rate. b. What is the difference between the pay-as-you-go and the fully funded social security  systems? The pay-as-you-go social security system collects payroll tax from the  young and redistributes to the old. The fully funded system collects money  from the young, invests in the capital market and returns it to them when  they become old. c. Why should the government intervene in health care markets even when they are  efficient? The government intervenes in the market even if it is efficient because it  cares about equity. In the health market, the government can improve  equity by supporting the poor. d. Why should differential taxes be imposed on goods with low elasticity of demand? Demand for goods with low elasticity of supply will not react much to price  changes by definition, and thus dead weight loss caused by taxation is low.  Therefore if the government has to tax goods, they should tax goods with  low elasticity of demand. e.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

IBE316final - IBE316:EconomicPolicy Final Name: ID:

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online