Means-Tested Government Programs Tend to Reduce Saving

question 127

Essay

Means-tested government programs tend to reduce saving. What are means-tested programs and how do they reduce saving?

Interpret the implications of different utility functions on consumption decisions.

Evaluate the effect of technological or environmental changes on consumption and saving decisions.

Understand the role of loan and savings interest rates on investment decisions.

Determine the present value of endowments and how this influences consumption over time.

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Definitions:

Borrowing

The act of obtaining funds from a lender under the agreement to repay with interest.

Par Value

A nominal value assigned to a security, such as a share of stock, representing the minimum price at which the security can be issued.

Premium

An amount paid in addition to the standard or expected cost, often for insurance coverage or higher quality goods and services.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's equity shares at certain times during the bond's life, usually at the discretion of the bondholder.