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The fact that increased financial resources have not brought greater measurable gains in student performance has led some education experts to question whether the problems may be due to structure, not just to the resources spent.

Other government programs seek to increase human capital either before or after the K–12 education system. Programs for early childhood education, like the federal Head Start program    , are directed at families where the parents may have limited educational and financial resources. Government also offers substantial support for universities and colleges. For example, in the United States about 60% of students take at least a few college or university classes beyond the high school level. In Germany and Japan, about half of all students take classes beyond the comparable high school level. In the countries of Latin America, only about one student in four takes classes beyond the high school level, and in the nations of sub-Saharan Africa, only about one student in 20.

Not all spending on educational human capital    needs to happen through the government: many college students in the United States pay a substantial share of the cost of their education. If low-income countries of the world are going to experience a widespread increase in their education levels for grade-school children, government spending seems likely to play a substantial role. For the U.S. economy, and for other high-income countries, the primary focus at this time is more on how to get a bigger return from existing spending on education and how to improve the performance of the average high school graduate, rather than dramatic increases in education spending.

How fiscal policy can improve technology

Research and development (R&D) efforts are the lifeblood of new technology. According to the National Science Foundation, federal outlays for research, development, and physical plant improvements to various governmental agencies have remained at an average of 8.8% of GDP. About one-fifth of U.S. R&D spending goes to defense and space-oriented research. Although defense-oriented R&D spending may sometimes produce consumer-oriented spinoffs, R&D that is aimed at producing new weapons is less likely to benefit the civilian economy than direct civilian R&D spending.

Fiscal policy can encourage R&D using either direct spending or tax policy. Government could spend more on the R&D that is carried out in government laboratories, as well as expanding federal R&D grants to universities and colleges, nonprofit organizations, and the private sector. By 2014, the federal share of R&D outlays totaled $135.5 billion, or about 4% of the federal government's total budget outlays, according to data from the National Science Foundation. Fiscal policy can also support R&D through tax incentives, which allow firms to reduce their tax bill as they increase spending on research and development.

Summary of fiscal policy, investment, and economic growth

Investment in physical capital, human capital, and new technology is essential for long-term economic growth, as summarized in [link] . In a market-oriented economy, private firms will undertake most of the investment in physical capital, and fiscal policy should seek to avoid a long series of outsized budget deficits that might crowd out such investment. The effects of many growth-oriented policies will be seen very gradually over time, as students are better educated, physical capital investments are made, and new technologies are invented and implemented.

Investment role of public and private sector in a market economy
Physical Capital Human Capital New Technology
Private Sector New investment in property and equipment On-the-job training Research and development
Public Sector Public infrastructure Public education Job training Research and development encouraged through private sector incentives and direct spending.

Key concepts and summary

Economic growth comes from a combination of investment in physical capital, human capital, and technology. Government borrowing can crowd out private sector investment in physical capital, but fiscal policy can also increase investment in publicly owned physical capital, human capital (education), and research and development. Possible methods for improving education and society’s investment in human capital include spending more money on teachers and other educational resources, and reorganizing the education system to provide greater incentives for success. Methods for increasing research and development spending to generate new technology include direct government spending on R&D and tax incentives for businesses to conduct additional R&D.


During the most recent recession, some economists argued that the change in the interest rates that comes about due to deficit spending implied in the demand and supply of financial capital graph would not occur. A simple reason was that the government was stepping in to invest when private firms were not. Using a graph, explain how the deficit demand is offset by the use by government in investment.

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U.S. Department of Commerce: Bureau of Economic Analysis. “National Data: National Income and Product Accounts Tables.” Accessed December 1, 2013. http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&910=X&911=0&903=146&904=2008&905=2013&906=A.

Board of Governors of the Federal Reserve System, “Selected Interest Rates (Daily) – H.15.” Accessed December 10, 2013. http://www.federalreserve.gov/releases/h15/data.htm.

The White House. “Fiscal Year 2013 Historical Tables: Budget of the U.S. Government.” Accessed December 12, 2013. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf.

The National Science Foundation. Accessed December 19, 2013. http://www.nsf.gov/.

Questions & Answers

meaning of Money, worth and wealth, economic goods and service
Mariana Reply
money is just means of exchange denomination of wealth while wealth is the sum total of all assets held in either liquid or non liquid form, where as worth is the exchange value of an asset.
what is equilibrium
Daniel Reply
it is intersect point of economics line in graph, but everytime not graph
it is the intersection point of supply and demand curves
GDP is domestic gross product. refer my site amanchabukswar.wordpress.com
Aman Reply
Hi everyone
hello lovely where am I?
Good morning
hi dear bro
why does a firm continue operating at a breakeven point
Prince Reply
to retain its customers for later coming profits.
this is because the firm's revenu is covering the variable cost so the firm should continuos business
and zero profit is a normal profit which covers entrepreneur's profit along with recovering wages, interest and rent.
what economic trend can we expect after lifting of 10 year long sanctions in an national economy?
tesfie Reply
difference between change in demand and change in quantity demanded
Maurice Reply
how to change
For a demand with repect to price. change in demand refers to the shifting of demand curve, where as change in quantity demanded means movement along the given demand curve.
According to lional Robbins how did he explain economics
Raphael Reply
He defined economics as a science which studies human behavior as a relationship between ends and scares which has alternative uses.
What is economics
Nasiru Reply
why are some countries producing inside the ppf
Claire Reply
prove or disprove that balance of trade of trade deficit is a cause of an abnormal demand curve?
Chioma Reply
what's the fixed cost at output zero
Saidou Reply
fixed cost stay the same regardless of the level of output
example; electricity bill is fixed cost....but when the machinery plant is not active and perhaps so offices are locked up due to unforseen circumstances..... definitely the electric nose dive.... that is a reduction in fixed right? am just saying hope am making a point Luke?
what are the differences between change in demand and change in quantity demand
Sulaiman Reply
I think change in demand has to do with change from one product to another product....while change in quantity demand has to do with change in terms of units but same product....maybe due price change most especially, seasonal reasons too.
change in demand has to do with price of that commodity why change in quantity demand has to do with shift an has to do with other factor other than price
what is consumers behaviour
Marfo Reply
i think it means the reaction expected of consumers in respect of changes in economic activities... most especially changes made by producers~wholesalers~retailers
importance of income
Emmanuel Reply
Tfor settlement of debt. For purchases. For payment of bills. For daily transactions. For social & recreational enjoyment. For business purposes etc
For investment purposes For security purposes For purpose of forecasting & strategizing.
what is the real definition of economics
jegede Reply
Economics is the study of the use and allocation of (scarce) resources
Jegede, what is the "non" real definition of economics then?
Economics is a study of how human use limited resources to fulfil their unlimited want
the study of how a society use scarce factors of production efficiently so as meet aggregate social demand
what is oligopoly?
Oligopoly can be defines as a market where by there is only tmo or more sellers of a commodity
Sory not tmo but two

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