Two Of The Most Implemented Policies Government Use To Achieve Economic Growth Are Monetary Policy And Fiscal Policy

1667 WordsMar 16, 20157 Pages
Introduction According to a article by Rich Karlgaard from forbes. During the great recession. U.S economy was performing better then expected and was growing. From 2008 to 2010, U.S GDP is projected at 14.3 trillion, 14.2 trillion, 14.6 trillion. So how did this actually happen? Carl Schramm, who heads America’s top entrepreneurial think tank, the Kauffman Foundation, explain in a interview with the author: “The single most important contributor to a nation’s economic growth is the number of startups that grow to a billion dollars in revenue within 20 years.” The statement made by Carl Schramm suggested that the increase of start ups, is the most important contributor to a nation economic growth. (Karlgraard,2010) Economic growth is an…show more content…
And they can adopt to do a their government debts is consider small by international standard, with a federal debt of less then 10% of the GDP. This compares favourably with debt ratio of U.S at 70%.But we can also see from the table that as fiscal stimulus was implemented during the period, government debt increases. A substainable fiscal policy requires the debt to not increase relatively to the increment of GDP. Therefore, government have to increase the taxes and decrease their spending in order to decrease their public debts. From the article, we can conclude the weakness in fiscal policy. There is no doubt that fiscal policy do contribute to economic growth but it is only for short run, We must understand that increase in government expenditures will end with a increase in tax. Monetary Policy Monetary policy, is how government manage their money supply to steer the economy . Government will either buy or sell bonds to increase money supply or decrease money supply respectively.Similar to Fiscal policy, there’s expansionary monetary policy and contradictary monetary policy. (Mofatt, Not Published) Expansionary Monetary policy, is where government increase the money supply in the market by buying bond. By doing so, the market interest rate will decrease, which in turn, cause the cost of borrowing
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