Question

what kind of action can a government take to control the economy's growth? (500 Words)

Answer 1

The government is taking steps in every country to help the economy achieve growth targets, full jobs and price stability. The Government regulates economic development in the United States by two approaches: monetary policy and fiscal policy. The government exerts its power through monetary policy to control the money supply and interest rate rates. It uses its power to tax and spend through fiscal policy.

To fight a slowdown, the Fed is using expansionary policy to raise money supply and lower interest rates. Borrowing money is cheaper, with lower interest rates, and the banks are more likely to lend it. Attractive interest rates allow companies to borrow capital to increase production, and enable customers to purchase more products and services. These sets of acts can in principle help the economy survive or recover from a recession.

In the nineteenth century, invention of modern technologies , e.g. steam power and telegrams, helped in efficiency. In the twenty-first century, Internet, AI, and computers helped improve productivity. Introduction of new control methods, e.g. Strong labor relations are helping to make the workers more competitive. Skills and skills improved.
More flexible job habits-research, self-employment. Increased net migration-especially encouraging workers with limited supply skills ( e.g. builders, fruit pickers) Boost retirement age and thus raise labor supply

A government may seek to control the rate of economic growth through supply and demand policies;

Expansionary fiscal policy – rising taxes to raise disposable income and stimulate consumption. Lower taxes, however, would increase the budget deficit and result in greater borrowing. The expansionary fiscal policy is ideally adapted in a recession when consumer spending falls.
Expansionary monetary policy – Interest rate cuts will increase domestic demand.
Stability . A key government role is to provide economic and political stability that allows for the normal economic activity to take place. Uncertainty and political instability will discourage investment and economics

Infrastructure building, e.g. new bridges, railway lines, and broadband internet, improves efficiency and reduces congestion.
Privatization and deregulation-improve output and performance.

Governments frequently over-estimate how much productivity growth they can improve. Some technological innovation comes without government interference from the private sector. Supply-side policies can help improve productivity to some degree, but how much they can ultimately improve growth levels is debatable. For example, after the supply-side policies of the 1980s , the government hoped there would have been a supply-side miracle that would allow for a much faster rate of economic growth. However, the Lawson boom of the 80s proved to be unsustainable and the UK growth rate stayed pretty much the same at about 2.5 percent At the very least supply-side policies would take considerable time

There is much greater scope for the government to increase growth rates for developing economies with substantial infrastructure failures and a lack of basic amenities. The potential for higher growth rates is much higher, by offering basic levels of education and infrastructure.

The bulk of growth in productivity is calculated by the private sector. Many technical advances come from private companies, with a few exceptions. It is the private sector that is evolving new technologies that accounts for the vast majority of the productivity growth that we see and the willingness of the government to invest in new technologies that would improve this productivity growth rate.