Explain Why, According to Feldstein and Horioka, One Should Expect

question 110

Essay

Explain why, according to Feldstein and Horioka, one should expect that domestic investment rates diverge widely from saving rates.

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Definitions:

Economic Choices

Decisions made by individuals, households, or firms regarding the allocation of scarce resources to satisfy needs and wants.

Income Tax

A tax levied by governments on individuals or entities' income, constituting a major source of government funding.

Present and Future Consumption

The concept of analyzing and balancing what is consumed today against what will be available or necessary for consumption in the future.

Efficient Taxation

A taxation system designed to minimize the economic costs or distortions that it imposes on society, while achieving desired revenue and distributional effects.