if you want to increase aggregate supply what policy would you use? why?

Expert Solution

The aggregate supply of the economy can be increased when the production capacity of the economy is increased. I would take up the following policies to increase the aggregate supply:

1) Investing in infrastructure:

Reason: When the government spends to build infrastructure like transportation system, ports, power generating facilities, etc. it increases the production capacity of the economy and results in increased aggregate supply.

2) Invest in education, skill building, and vocational training:

Reason: When the government spends to educate people and build skills, it increases their productivity. This type of investment helps in building human capital which is essential to production. Higher human capital leads to higher aggregate supply.

3) Spending on technological innovations

Reason: Technological innovations helps in producing more with the given resources. Technological innovation increases the productive capacity of an economy and increases aggregate supply.

4) Spending on healthcare

Reason: A healthy workforce helps in higher level productivity and output. When the government spends on healthcare, it helps in increasing the aggregate supply.

Rahul Sunny answered 2 years ago

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