Question

1) Every society faces trade-offs. Explain the concept of trade-offs. Give an example.

2) Outline the various actions the government sector could take to promote growth.

Answer 1

1) Let's assume there are two things which the economy can produce they are health and education. Like everywhere in the world the resources in the economy are limited. So they can either produce health or education. The decision between the two option available goods is called a trade-off. The economy is the produce all health will have to reduce the education in the society or if they produce education they will have to reduce the expenditure on health.

This decision of choosing one good over the other is called a trade-off between the two goods.

2) Various actions the government could do to promote growth are:

• Decrease the taxes, doing so will increase the disposable income in the market. And people will demand more goods and increase the economic activity.
• Increase the government expenditure or purchase, government f increased purchase form the market will increase the demand in the market and hence the economic activity will be more promoting the growth.
• Deficit budget, the government can borrow and spend that extra amount in the economy. Increased income of the government even though for borrowing will increase the economic activity in the economy and promote growth.