00:01
Okay, so for this question, it asks whether those factors, those policies are likely to increase the rate of economic growth in the united states.
00:14
So first one for part a is say that if the congress passed an investment tax credit, which reduce the firm's tax if it installed new machine and equipment.
00:26
So for this one, a lower tax for this kind of installing in new machine and equipment will actually increase economic growth.
00:39
The reason why is that if the tax of installing those machines and equipment is lower, then firms are more likely to invest in their capital.
00:50
So they would like to give firms incentives to purchase more capital.
00:55
So let's say, we'll increase capital.
01:00
And as a result, as a result, increase capital over labor, or capital to labor ratio.
01:14
And also, if some of the new capital have some new technology, the tax credits will actually contribute to shift the production function upward.
01:24
So may have some new technology, and those new technology will even shift up the production function.
01:35
So basically, for part a, it will actually increase the economic growth...