Analysis of Government Investment: Project Assignment in Economics

This report delves into the economics of government investment, focusing on the U.S. Office of Management and Budget's (OMB) approach to evaluating projects. It emphasizes the importance of comparing a project's return to its opportunity cost, particularly the potential returns from private sector investments. The report highlights the use of the private sector's historical pre-tax returns as a discount rate. Furthermore, it examines how government decisions, such as selling assets, impact borrowing and revenue, and the use of the government's borrowing cost as the discount rate. The report draws upon sources like the OMB and other online resources to support its analysis, offering a detailed understanding of the economic considerations in government investment decisions.

ASSIGNMENT
[Document subtitle]

The U.S. Office of Management and Budget made the distinction in order to
understand that the new project is the appropriate investment or not. The government
should make the comparison between the project’s return and the project’s cost of
opportunity. The opportunity cost can be measured by looking at the returns that
might be generated by enabling society to investment of private sector along with the
intended resources of the project and because of this the historical pretax returns on
the investment of the private sector at a rate of discount is used ("Office of
Management and Budget: Open Government", 2016). Further, it makes the
comparison between the return on the project of the government and the various
private sector’s alternative returns.
Further, the government efficiently trades the assets which are the existing ones for
the power of purchasing; a transaction doesn't have a direct impact on the society.
There is no trade-off socially which is being included in the decision related to the
selling of asset. Furthermore, there is a trade-off for the government, since the
revenue is increased by selling the asset which is used to offset the borrowings of the
government (http://www.omniaweb.it, 2016). The usage of the government borrowing
cost is the natural rate of discount which is for the considerations.

REFERENCES
http://www.omniaweb.it, O. (2016). Home. Ombvalves.com. Retrieved 11 November
2016, from http://www.ombvalves.com/
Office of Management and Budget: Open Government. (2016). The White House.
Retrieved 11 November 2016, from https://www.whitehouse.gov/omb/open