Burden of government debt


Congress passes and the president signs into law a bill authorizing the construction of two public recreational facilities, each of which costs $400,000 now and will last for ten years. Each project is financed by government borrowing at an interest rate of 5 percent. The benefits of the first project are $40,000 per year for the first five years, $60,000 per year for the next two years, and $80,000 per year for the last three years. The benefits of the second project are $70,000 per year for the first four years, $50,000 in the fifth year, $40,000 in the sixth year, and $30,000 per year for the last four years. Evaluate whether the spending on each of these projects adds to the burden of government debt over the next ten years.

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Macroeconomics: Burden of government debt
Reference No:- TGS061478

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