Question

If a nation chooses to reduce consumption and increase investment, how would this affect economic growth? In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

Answer 1

Answer

If a nation choses to reduce the consumption and increase the investment , this will have a negative impact on the overall economy of the country becaue if the investemnt is more than accordingly the consumption should be more in order to maintian the econoical balances otherwse it will lead to low gross dometic product and consumption rate . The consumption is ecided by the incomespending which is a key parameter in economic condition of a country . The govt. of a country should use following policies in order to increase the production .

• policies for increased govt. and the private sector sectr investment on the infrastructural developments like developed transport network and telecommunication for the speed movement of people , services an goods and lowering the business doing cost.
• expansion of stock (capital ) and reducing the average life /age of capital by business investment .
• welfare and tax reforms for development of work incentives . and more people income ultimately higher productivity .etc

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