The Federal Government and the State Government share responsibility for investing in infrastructure. However, each government...
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The Federal Government and the State Government share responsibility for investing in infrastructure. However, each government would prefer that the other government invest more in infrastructure instead. For the coming fiscal year, each government can decide to either INCREASE or REDUCE infrastructure investment. The resulting budget surpluses (in billions of dollars) for these various strategies are shown in the payoff matrix below. If both governments increase their infrastructure investment, budget surpluses will be higher in the future due to higher economic growth enabled by the new infrastructure. However, if both governments fail to invest adequately in infrastructure, both of their budget surpluses will be lower in the long run because infrastructure investment becomes more costly the longer it is postponed. Both governments are seeking to maximise their respective budget surpluses. a. What type of game is this? DS b. Will either government increase its infrastructure investment? N Federal Government Type PD for Prisoner's Dilemma or DS for Dominated Strategy. Type Y for Yes or N for No. Increase (1) Reduce (R) State Government Increase (1) 5,5 7,1 Reduce (R) 1,7 2,2 The Federal Government and the State Government share responsibility for investing in infrastructure. However, each government would prefer that the other government invest more in infrastructure instead. For the coming fiscal year, each government can decide to either INCREASE or REDUCE infrastructure investment. The resulting budget surpluses (in billions of dollars) for these various strategies are shown in the payoff matrix below. If both governments increase their infrastructure investment, budget surpluses will be higher in the future due to higher economic growth enabled by the new infrastructure. However, if both governments fail to invest adequately in infrastructure, both of their budget surpluses will be lower in the long run because infrastructure investment becomes more costly the longer it is postponed. Both governments are seeking to maximise their respective budget surpluses. a. What type of game is this? DS b. Will either government increase its infrastructure investment? N Federal Government Type PD for Prisoner's Dilemma or DS for Dominated Strategy. Type Y for Yes or N for No. Increase (1) Reduce (R) State Government Increase (1) 5,5 7,1 Reduce (R) 1,7 2,2
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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