Question

In: Economics

why is it problematic that the US spends such a high percentage of its GDP on...

why is it problematic that the US spends such a high percentage of its GDP on medical care? Alternatively, why could we spend substantially more without ill effect?

Solutions

Expert Solution

Even though spending on the medical care by the government might seem like a noble cause, it could become problematic for the USA if it spends too much on it. The reasons for this are that excess of everything is bad. So, if the country spends a lot of money on the medical care, it will be left with a very little amount to spend on other important areas. Also, to finance the increase in the spending, either the government will have to raise taxes, which will hurt the pockets of the citizens, or it will have to borrow from other nations, which will lead to the budget deficit.

Now the next question comes that how can we spend more without the ill effects. The best strategy for this would be to diversify the spending. If the spending is done in such a way that one sector is getting the aid that it requires, while the other sector is able to raise the funds to support that aid, then the spending will be efficient and there will be no or very less ill effects.


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