Revenue Sharing in the United States Mainly Involves Federal Revenue

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The Answer is a. At the core of the issue is a fundamental difference between China's focus on investment as a source of demand and the U.S. focus on consumption as a source of demand. Localities in China are expected to use much of the shared revenue for investment. In the United States, the shared revenues are expected to be used for consumption by individuals. We note that some of the latter consumption in the United States in an economic sense is actually investment in human capital, e.g., healthcare or education/training. There are no doubt other issues particularly related to the important role of the government in China (at both the national and local levels) and individual consumers in the United States.
b. As discussed in (a), the implication is greater investment in China and greater consumption in the United States.

Revenue Sharing in the United States Mainly Involves Federal Revenue

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Revenue Sharing in the United States Mainly Involves Federal Revenue

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Correct Answer:
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