Question

In: Economics

When considering the merits of employment resulting from a project, which of the following questions is...

When considering the merits of employment resulting from a project, which of the following questions is most important?

a. Could more jobs have been created if another project had been undertaken?
b. Will the persons employed by this project create more wealth than they would if employed in other areas?
c. Does the project increase total employment?
d. How many people does the project employ?

Government spending programs that create jobs are often popular because

a. when spending programs are funded by the government there are no secondary effects.
b. the benefits of job creation are always greater than the costs. Jobs are the key to economic progress.
c. the created jobs are highly visible, while the secondary effects of lost jobs in other areas, higher interest rates, and higher future taxes are less visible.
d. if a spending program is approved by Congress, it means that the value of what is produced is greater than the value of the resources used to produce it.

When the government funds a project that will create jobs, the funds for the project

a. will leave private sector output and employment unchanged.
b. are essentially free, because the project originated in the government sector.
c. will have to be either taxed or borrowed from the private sector.
d. will generate additional tax revenues that will pay for the project.

Solutions

Expert Solution

Question 1

The answer is option a. This is becasue the most important question that has to be asked from the employment side is whether the current project chosen will increase the employment more than any other projects would have. The second option is just a manifestation of this first option, but more to do with the wages side of the employment and not employment itself, more wealth will be created is a particular project offers more wages than the other available project options. The third option is also not valid bacause the project will definitely increase employment, even if it is by one unit. The question to be asked is whether the project increase total employment more than any other project. And the last option is also invalid as it is a question that is already asked by the first option.

Question 2

The answer is option c. When the government creates jobs, it is through projects the funding of which has to be done by borrowing from the people. This will lead to greater interest rates in future, which will cause crowding out of private investment and loss of jobs in the private sector, and higher tax rates in the future to recover the money spent in the project. However, these are effects that are not seen in the forefront and the main focus is always on the number of jobs created as a result of the project which is seen directly.

Question 3

The correct option is option c. This is because for any spike in government spending, the funds are always borrowed from the publc in the form of taxes. The private sector output and employment will undergo a change because massive public sector borrowing leads to crowding out of the private sector investment and that might create loss of jobs. The project will definitely not be free as it has to be funded from the public tax money. Such projects that generate employment will definitely increase the tax revenue by bringnig more people into the income tax base but these future tax revenue collections will not be for funding a project implemented before.


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