Social Rate of Discount. Assume that the rate of return on long-term government bonds is 8%, 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 94% of total income.
A. Based on the information provided, calculate an economically appropriate social rate of discount.
B. Would an increase in the Federal deficit that led to an increase 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 8%, 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 94% of total income.
A. Based on the information provided, calculate an economically appropriate social rate of discount.
B. Would an increase in the Federal deficit that led to an increase in the long-term government bond rate affect the appropriate social rate of discount? If so, how? If not, why not?