Social Rate of Discount. Assume that the rate of return on long-term government bonds is 9%, a typical after-tax return on investment in the private sector is 10%, the marginal corporate and individual tax rate is 50%, and consumption averages 95% of total income.
A. Based on the information provided, calculate an economically appropriate social rate of discount.
B. Would a reduction in the Federal deficit that led to a decline in the long-term government bond rate affect the appropriate social rate of discount? If so, how? If not, why not?

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The Answer of Social Rate of Discount. Assume that the rate of return on long-term government bonds is 9%, a typical after-tax return on investment in the private sector is 10%, the marginal corporate and individual tax rate is 50%, and consumption averages 95% of total income.
A. Based on the information provided, calculate an economically appropriate social rate of discount.
B. Would a reduction in the Federal deficit that led to a decline in the long-term government bond rate affect the appropriate social rate of discount? If so, how? If not, why not?