Question

Policy makers in the U.S. government have long tried to write laws that encourage growth in per capita real GDP. These laws typically do one of three things: a. They encourage firms to invest more in research and development in order to boost technology. b. They encourage individuals to save more in order to boost the physical capital stock. c. They encourage individuals to invest more in education in order to boost the stock of human capital. For each of the above three points, please name a law or government program with that intention.

Answer 1

(a)They encourage firms to invest more in research and development in order to boost technology.

Some of the laws or government programs developed to encourage it include:

1. Granting patents for inventions
2. Issuing grants from the National Science Foundation
3. Issuing grants from the National Institute of Health
4. Offering tax credits for R&D costs

(b) They encourage individuals to save more in order to boost the physical capital stock

1. Lowering tax rates on incomes earned through savings
2. Permitting citizens to open health and savings account
3. Offering retirement savings plan
4. Coming up with 529 education savings account

(c) They encourage individuals to invest more in education in order to boost the stock of human capital

1. Establishment of a system of public schools and universities
2. Government-provided student loans
3. Provision of education subsidies for veterans