What should the Federal Government do i order to encourage...

1. What should the federal government do in order to encourage investment in human capital? The decision to invest in human capital is influenced by considerations similar to those that motivate a firm to invest in physical capital: the cost of the investment verse the expected return. For example, investing in a college education may require the one borrow the money for tuition. If the interest rates on the loan rise then people will most be less likely to invest in a college education. Thus, investment in education may be negatively related to the interest rate, much as physical investment is. This is one reason why, in order to encourage economic growth and productivity, the U.S government provides low interest loans for college…show more content…The first year of the tax generated $125 million in revenue (Forbes 2012). In 1940, the tax was raised to 1.5 cents per gallon, which would be equivalent of a rate of 24.26 per gallon in 2011 dollars (Forbes 2012).