Question

Empirical evidence shows that institutions are important factors affecting economic growth.

A) What are institutions?

B) What role do they play in affecting economic growth

Answer 1

A) Institution refers to any organisation, group of persons or any institute which is tasked with framing policy with respect to politics, governance or economy. They are frontrunner in deciding the path of the nation.

B) The institutions are tasked with the job of policy framing and implementation. There are various institutions like the Senate, the Fed, and other private institutions as well like, Commercial banks. The Economic institutions are also called as the financial institutions and these are equipped with the task of framing monetary policies for the nation. By keeping and eye on the rate of inflation and deflation, on business cycles and on the mood of stock market, these institutions comes up with the set of guidelines so that the whole nation moves in one direction in a sync and thus overcome all the barriers to the growth.