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a) Whether political opponents are right in claiming that the trust fund will go bankrupt and when it will go bankrupt. Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. As taxes are paid by each young is 1,000 Then, the total expenses on medical would be = Expenses for old+Expenses for very old -Tax = 90,000+200,000 -100,000 = 190,000 Therefore, for the year 2020, there would be 190,000 which means, there is a positive fund as the expenses are below 1 million. Then, in the year 2021, the expenses would be 380,000 and there is a positive fund. For the year 2022, there would also be positive funds as the total expenses are below 1 million which are 570,000 For the year 2023, the total expenses would be 760,000 which means there is a positive fund. For the year 2024, total expenses would be 950,000 which would be a positive fund. For the year 2025, it would be 11,40,000 which means there is a negative fund. Then, on 1st January 2026, there would be a negative fund of = 11 , 40 , 000 − 10 , 00 , 000 = 140000 It means the opponents are right, the trust will go bankrupt. b) Whether the trust fund will go bankrupt and when there is a decrease in the death rate. Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. Yes, Country M will still go bankrupt in the same year because there is no effect on the cost or expenses of medical. There is only a decrease in death rates which does not reduce the expenses of the trust. Therefore, the trust will have high expenses in the year 2025 as compared to the maximum amount, and the trust will go bankrupt this year. c) Whether the trust fund will go bankrupt and when there is an increase in medical expenditure by 50% without any effect on death. Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. When there is an annual increase in medical expenditure by 50% without any effect on death rates then, then the expense of the trust’s expenses will reduce to 45,000 for the old and 100,000 for the very old, and here, the total expenses of the trust will reduce to 145,000. It means there would be no negative funds up to the year 2026, and in the year 2027, the trust will go bankrupt and on January 2028, the trust will have 160,000 negative funds. d) Whether the trust fund will go bankrupt and when if there is an increase in the retirement age from the old to very old Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. When there is an increase in the retirement age from the old to very old who also pay tax in the same amount as the young population then there will be no negative fund as there is zero consumption of medical or healthcare benefit from the trust which reduce the expenses of the trust. Very old get retirement benefits in the same amount that they pay for taxes. Therefore, the trust would not go bankrupt. e) Whether the trust fund will go bankrupt and when there is a reduction in retirement age and increase in tax to 2000 Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. When there is abhor for the increase in retirement age and trust will reduce this age again but it imposes the tax of 2000, which will help the trust to recover its expenses. It means the firm will not go bankrupt for 12 years but after that in 2031, the bank will go bankrupt as its negative fund will develop the trust will have 180,000 negative funds on January 2032 because in this year the trust will cross the amount of 1 million. f) Whether the trust fund will go bankrupt and when there is a reduction in tax rates again and 10% earning on investment Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. If the tax rates again reduce to 1000 and there is a 10% earning on investment, then each year, the trust will have 100,000 returns on this investment which reduce its expenses to 90,000 each year but it will save the trust from bankruptcy up to 12 years and in the year 2031, the trust will go bankrupt as on January 2032, there would be 180,000 negative funds. g) Whether the trust fund will go bankrupt and when if there is an increase in young workers Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. When there is an increase in young workers then there would be an increase in tax as now young will pay a tax of 300,000 which means the total expenses of the trust will be zero as according to policy, the trust force people to leave the island before they become old and use healthcare. Therefore, there would be no negative fund in any year and the firm will go bankrupt. h) The minimum number of immigrants that are required to get the solvent position. Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. The minimum number of immigrants would be 1000 because this number of immigrants matches the cost/expenses and the spending of immigrants to the maximum limit which is 1 million. It will make the trust solvent and there would no negative fund and no positive fund. Here, in this solvent position, the trust will not go bankrupt. As the limit of the amount is 1 million and young people pay taxes of about 1000 per person each year which means if 1000 immigrants pay taxes in the year then the firm will achieve its solvent position.

a) Whether political opponents are right in claiming that the trust fund will go bankrupt and when it will go bankrupt. Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. As taxes are paid by each young is 1,000 Then, the total expenses on medical would be = Expenses for old+Expenses for very old -Tax = 90,000+200,000 -100,000 = 190,000 Therefore, for the year 2020, there would be 190,000 which means, there is a positive fund as the expenses are below 1 million. Then, in the year 2021, the expenses would be 380,000 and there is a positive fund. For the year 2022, there would also be positive funds as the total expenses are below 1 million which are 570,000 For the year 2023, the total expenses would be 760,000 which means there is a positive fund. For the year 2024, total expenses would be 950,000 which would be a positive fund. For the year 2025, it would be 11,40,000 which means there is a negative fund. Then, on 1st January 2026, there would be a negative fund of = 11 , 40 , 000 − 10 , 00 , 000 = 140000 It means the opponents are right, the trust will go bankrupt. b) Whether the trust fund will go bankrupt and when there is a decrease in the death rate. Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. Yes, Country M will still go bankrupt in the same year because there is no effect on the cost or expenses of medical. There is only a decrease in death rates which does not reduce the expenses of the trust. Therefore, the trust will have high expenses in the year 2025 as compared to the maximum amount, and the trust will go bankrupt this year. c) Whether the trust fund will go bankrupt and when there is an increase in medical expenditure by 50% without any effect on death. Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. When there is an annual increase in medical expenditure by 50% without any effect on death rates then, then the expense of the trust’s expenses will reduce to 45,000 for the old and 100,000 for the very old, and here, the total expenses of the trust will reduce to 145,000. It means there would be no negative funds up to the year 2026, and in the year 2027, the trust will go bankrupt and on January 2028, the trust will have 160,000 negative funds. d) Whether the trust fund will go bankrupt and when if there is an increase in the retirement age from the old to very old Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. When there is an increase in the retirement age from the old to very old who also pay tax in the same amount as the young population then there will be no negative fund as there is zero consumption of medical or healthcare benefit from the trust which reduce the expenses of the trust. Very old get retirement benefits in the same amount that they pay for taxes. Therefore, the trust would not go bankrupt. e) Whether the trust fund will go bankrupt and when there is a reduction in retirement age and increase in tax to 2000 Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. When there is abhor for the increase in retirement age and trust will reduce this age again but it imposes the tax of 2000, which will help the trust to recover its expenses. It means the firm will not go bankrupt for 12 years but after that in 2031, the bank will go bankrupt as its negative fund will develop the trust will have 180,000 negative funds on January 2032 because in this year the trust will cross the amount of 1 million. f) Whether the trust fund will go bankrupt and when there is a reduction in tax rates again and 10% earning on investment Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. If the tax rates again reduce to 1000 and there is a 10% earning on investment, then each year, the trust will have 100,000 returns on this investment which reduce its expenses to 90,000 each year but it will save the trust from bankruptcy up to 12 years and in the year 2031, the trust will go bankrupt as on January 2032, there would be 180,000 negative funds. g) Whether the trust fund will go bankrupt and when if there is an increase in young workers Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. When there is an increase in young workers then there would be an increase in tax as now young will pay a tax of 300,000 which means the total expenses of the trust will be zero as according to policy, the trust force people to leave the island before they become old and use healthcare. Therefore, there would be no negative fund in any year and the firm will go bankrupt. h) The minimum number of immigrants that are required to get the solvent position. Introduction: Trust funds can be complex as these legal arrangements need the assistance of any third party or individuals to keep the assets in a particular account so that the other individual or firm will get benefits. The minimum number of immigrants would be 1000 because this number of immigrants matches the cost/expenses and the spending of immigrants to the maximum limit which is 1 million. It will make the trust solvent and there would no negative fund and no positive fund. Here, in this solvent position, the trust will not go bankrupt. As the limit of the amount is 1 million and young people pay taxes of about 1000 per person each year which means if 1000 immigrants pay taxes in the year then the firm will achieve its solvent position.

Health Economics

Health Economics

14th Edition

ISBN: 9781137029966

Author: Jay Bhattacharya

Publisher: SPRINGER NATURE CUSTOMER SERVICE

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Chapter 19, Problem 10E

Chapter 19, Problem 12AP

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