Externalities connected with consumption and saving

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a. Give two examples of externalities connected with consumption and saving that can be used in arguing for policies aimed at increasing U.S. personal saving. Explain why they can be used that way.

b. Explain what a traditional I.R.A. is. Explain how it increases a depositor's return to saving.

c. Explain a method that economists have used to estimate the fraction of deposits into traditional I.R.A.s that represent "new" savings induced by the favorable tax treatment the deposits receive. What theoretical reasons suggest that we could reasonably expect that less than half of these I.R.A. deposits are new saving, induced by the tax treatment? Explain

Reference no: EM13978574

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