Question

1. An example of policy aimed towards long run growth would include;

   		contractionary monetary policy
   		expansionary fiscal policy
   		an active debt reduction policy
   		a policy aimed at encouraging immigration

Answer 1

Expansionary fiscal policy.

This kind of policies were handled and managed by the government authorities. This include increasing government expenditure and cutting of tax rates. This kind of policies focused for long run economic growth. The cutting of tax rates will increase the disposable income and increase the consumption pattern of the people. Thus the aggregated demand will increase with respect to this. Thus the economy will functioned for long run development and growth through expansionary fiscal policies. This will increase the employment rate also. Higher government intervention will give more importance for the reduction of social problems like poverty, inequality, low standard of living etc. The proper implementation of government policies will increase the confidence of people towards the government policies. The increasing government spending will distributed through increasing allocation of subsidies and incentives for the firms and industries. Government intervention will promote equality in the economy and maintain the minimum standard of living among the people, with more preference for welfare programmes.