Question

1. In recent years, the federal and state governments have reduced the percentage of higher education costs that they will pay, thus increasing the percentage of costs borne by students and their families. What is the likely effect on the future rate of growth in the United States? 2. Why can growth only occur if current consumption is sacrificed? (think about this in terms of what college students give up to obtain in the future) 3. Suppose that the value of the dollar gets weaker, i.e., depreciates. Explain the effect on the Short Run Aggregate Supply Curve and Aggregate Demand curves. What will happen to the price level and to real GDP? (think about the effects on imports / exports)

Answer 1

1. The percentage of expenditure on higher education is reduced by federal and state governments thus it has more spending capacity on the part of the government which they can spend on other head. but this has a negative  aspect when the percentage of spending on higher education is getting reduced there is a higher probability of dropouts because their expenditure on education is getting increased.
2. Wealth from the hands of college students is minimised or taken away which will reduce the spending capacities in future.
3. when the value of dollar depreciates the effect on export will be positive because export will increase and it will be cheaper the effect on import will be negative because imports will become costlier. Aggregate supply curve will rise and aggregate demand curve will fall. There is a chance of price level getting raised because of lack of competition from external players.