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The fact that increased financial resources have not brought greater measurable gains in student performance has led some education experts to question whether the problems may be due to structure, not just to the resources spent.

Other government programs seek to increase human capital either before or after the K–12 education system. Programs for early childhood education, like the federal Head Start program    , are directed at families where the parents may have limited educational and financial resources. Government also offers substantial support for universities and colleges. For example, in the United States about 60% of students take at least a few college or university classes beyond the high school level. In Germany and Japan, about half of all students take classes beyond the comparable high school level. In the countries of Latin America, only about one student in four takes classes beyond the high school level, and in the nations of sub-Saharan Africa, only about one student in 20.

Not all spending on educational human capital    needs to happen through the government: many college students in the United States pay a substantial share of the cost of their education. If low-income countries of the world are going to experience a widespread increase in their education levels for grade-school children, government spending seems likely to play a substantial role. For the U.S. economy, and for other high-income countries, the primary focus at this time is more on how to get a bigger return from existing spending on education and how to improve the performance of the average high school graduate, rather than dramatic increases in education spending.

How fiscal policy can improve technology

Research and development (R&D) efforts are the lifeblood of new technology. According to the National Science Foundation, federal outlays for research, development, and physical plant improvements to various governmental agencies have remained at an average of 8.8% of GDP. About one-fifth of U.S. R&D spending goes to defense and space-oriented research. Although defense-oriented R&D spending may sometimes produce consumer-oriented spinoffs, R&D that is aimed at producing new weapons is less likely to benefit the civilian economy than direct civilian R&D spending.

Fiscal policy can encourage R&D using either direct spending or tax policy. Government could spend more on the R&D that is carried out in government laboratories, as well as expanding federal R&D grants to universities and colleges, nonprofit organizations, and the private sector. By 2014, the federal share of R&D outlays totaled $135.5 billion, or about 4% of the federal government's total budget outlays, according to data from the National Science Foundation. Fiscal policy can also support R&D through tax incentives, which allow firms to reduce their tax bill as they increase spending on research and development.

Summary of fiscal policy, investment, and economic growth

Investment in physical capital, human capital, and new technology is essential for long-term economic growth, as summarized in [link] . In a market-oriented economy, private firms will undertake most of the investment in physical capital, and fiscal policy should seek to avoid a long series of outsized budget deficits that might crowd out such investment. The effects of many growth-oriented policies will be seen very gradually over time, as students are better educated, physical capital investments are made, and new technologies are invented and implemented.

Investment role of public and private sector in a market economy
Physical Capital Human Capital New Technology
Private Sector New investment in property and equipment On-the-job training Research and development
Public Sector Public infrastructure Public education Job training Research and development encouraged through private sector incentives and direct spending.

Key concepts and summary

Economic growth comes from a combination of investment in physical capital, human capital, and technology. Government borrowing can crowd out private sector investment in physical capital, but fiscal policy can also increase investment in publicly owned physical capital, human capital (education), and research and development. Possible methods for improving education and society’s investment in human capital include spending more money on teachers and other educational resources, and reorganizing the education system to provide greater incentives for success. Methods for increasing research and development spending to generate new technology include direct government spending on R&D and tax incentives for businesses to conduct additional R&D.


During the most recent recession, some economists argued that the change in the interest rates that comes about due to deficit spending implied in the demand and supply of financial capital graph would not occur. A simple reason was that the government was stepping in to invest when private firms were not. Using a graph, explain how the deficit demand is offset by the use by government in investment.

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U.S. Department of Commerce: Bureau of Economic Analysis. “National Data: National Income and Product Accounts Tables.” Accessed December 1, 2013. http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&910=X&911=0&903=146&904=2008&905=2013&906=A.

Board of Governors of the Federal Reserve System, “Selected Interest Rates (Daily) – H.15.” Accessed December 10, 2013. http://www.federalreserve.gov/releases/h15/data.htm.

The White House. “Fiscal Year 2013 Historical Tables: Budget of the U.S. Government.” Accessed December 12, 2013. http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf.

The National Science Foundation. Accessed December 19, 2013. http://www.nsf.gov/.

Questions & Answers

what is the Invisible Hand?
adrian Reply
What are the limitations of a commercial Bank to create credit
Tanyi Reply
what is meant by efficiency of labour
Fritz Reply
production possibility curve
Mama Reply
graphs about production possibility curve?
I cant open the links in the text.
what are the concept of economic
dauda Reply
demand suply and population
graphs on about ppc
with the aid of diagrams illustrate movement along and shifts in demand curve
Mercy Reply
what is scarcity
ISAH Reply
limited in supply relative to demand
scarcity means resources available to provide our daily needs are limited
shortage of resources that we need for our demand. basically price go up due to this problem.
scarcity means our resources r not enough for us or our resources r limited
discuss the effects of price controls int the economy
• It stimulates excess demand, which cannot be statified ie shortage in the market. • It encourages hoarding of commodities by wholesales and retailers. • It leads to the creation of " black market" or undercounter sales and its attendant high prices. • It encourage conditional sales of products.
on how scarcity,choice and opportunity cost work together
means less than requirement
What are the reasons for the existence of monopoly?
Gerry Reply
Because such barriers occur in different forms, there are therefore varying reasons for the existence of monopolies. Ownership of a Key Resource: When one company exerts sole control over a resource that is necessary for the production of a specific product, the market may become a monopoly.
Thanks Kenneth
what is international trade
Syed Reply
what is imperfect compition
what is crowding out effect
what is federal finance?
what is populic
what is imperfect compition
Explain five importance of the study of economic
Francis Reply
study of economics help a person to make rational choice in multiple wants. help individual to be a well all-round thinker.
the five important of the study of economics are as follows (1)time (2)management of resources (3)choice making (4)business(5)scarcity
an increase in demand (while supply remains constant) what will happen to deh graph?
Thabiso Reply
what is going to happen to the graph if there is an increase in demand, While supply remains constant .
What will happen to the graph if there is an increase in demand While supply remains constant?
price will increase high than automatically demand will decrease
equilibrium ?
is when the supply and demand are balanced
as demand increase and supply remain constant means the price will increase also
what is the difference between economic growth and economic development ?
What is black money
what is demand
Sarkwah Reply
demand is the willingness to buy a commodity backed by the ability to pay.
demand is mere desire on commodity with ability to back up with purchasing power
demand is the want of commodity back by the ability to pay for that commodity
demand is the willingness to buy any type of commodity for the exchange of something that is valuable to the seller.
demand is any valuable commodity that people are willing to buy at prices.
Equilibrium is when there's an equality between quantity demanded and quantity supplied
Victory Reply
Again the consumer will be in equilibrium if the price of the commodity is equal to Marginal utility of that product

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