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What is more appropriate to help stimulate economic growth; consumption or investment demand? What sector do...

What is more appropriate to help stimulate economic growth; consumption or investment demand? What sector do you think our economy should look at stimulating, consumers or businesses? Explain your reasoning using the concepts of aggregate demand and supply.

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Answer;-

It is the demand that drives supply. If consumers demand anything more then only firms will supply it and not vice versa. So, it is more appropriate to stimulate consumption for economic growth. Increase in consumption will increase aggregate demand and AD curve shifts to the right.

Further, the growth will be more fair if it is complemented by increased supply. As then only a desirable price level can be maintained. Therefore, business sector should be given boost (stimulated) by the government by providing loans at lower rates, easing business norms, providing tax credits etc. Boost to business sector will increase aggregate supply and AS curve will shift to the right.

Rahul Sunny answered 2 years ago
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