Explain how public debt can crowd out private investment.
b.Even if the crowding out effect does occur, explain the argument that crowding out does not
necessarily undermine overall economic growth.
2. Is internally held public debt or externally held public debt less likely to be a problem? Explain.
3. a.How does our ratio of public debt to GDP compare with other democratic market-economy countries’
b.Does this indicate whether or not our debt ratio is a problem? Explain.
4. You have just been elected President of the United States, based on your campaign promise to buy
everyone a new sport utility vehicle. What are your funding options for this spending program, and what
are the implications of each option?
5. Explain how taxes are levied in a progressive income tax system and the rationale for choosing a
progressive income tax structure.
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