Expansion of preschool programs for disadvantaged children

Question

Use the circular flow model to confirm this assertion for an expansion of preschool programs for disadvantaged children?

Answer 1

This is shown as an increase in goods and services from government to households or as a decrease in net taxes, which is equivalent to an increase in transfer payments.  In either case, this is a redistribution of income or services in favor of the less well off.  As additional teachers are hired and paid, there will be an increase in resources paid by the government.

There will be some reallocation of resources from private enterprise to government and some decrease in unemployment, unless the economy is already at full employment.  In this case, there will some upward pressure on prices since, to the extent the program is a transfer payment, there will be no increase in production.