Question

The budget office of France has calculated its long run finances under two scenarios: Outcomes under an unchanged current policy, and outcomes under an alternate policy that increases subsidies to children that is paid for by reductions in government retirement pensions to the elderly. Details are in the table below:

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5. The budget office of France has calculated its long run finances under two scenarios: Outcomes under an unchanged current policy, and outcomes under an alternate policy that increases subsidies to children that is paid for by reductions in government retirement pensions to the elderly. Details are in the table below: French Government Fiscal Stance (Present discounted values) Current Policy Current and future government spending Government net Assets-$4 trillion Generational Accounts of $33.5 trillion living generations Generational Accounts of $18 trillion future generations Alternate Policy $50 trillion $50 trillion -$4 trillion $9 trillion $6.5 trilliorn a. What is the Fiscal Imbalance under the current policy? What is the Fiscal Imbalance under the Alternate Policy? b. Under the alternate policy, is the govemment sustainable" in the long run? Explain