Question

What are the best policies that promote economics growth? Briefly discuss.

Answer 1

There are two expansionary policies to promote economic growth-

i) Expansionary fiscal policy- Central government can implement fiscal policy by either expanding government spending or decreasing tax rate. This increases spending which leads to increase in aggregate demand which further results in economic growth.

Expansionary monetary policy- Central government can implement monetary policy by increasing the money supply by decreasing interest rate. This leads to increase in aggregate demand which further results in economic growth.