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Growth in the Economy - Coursework Example

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The paper talks about fiscal and monetary policies to improve the GDP growth and the employment rate, difference in the impact of policies on a closed economy versus an open economy, concept of multiplier and its Impact, impact of growing federal budget deficit on the economic growth…
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Growth in the Economy
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Download file to see previous pages Improving the efficiency of the workers would require lesser number of workers to complete a job in comparison to the situation when the workers’ skills were not upgraded. The money saved by employing lesser number of workers can be utilized to make the payments for the technological and skill up gradation. The enlargement in the production level of the country, both as a result of increasing employment and the efficiency enhancement of the workers, would enable the producers to cut the price levels of the products and the services. This decrease in the price level would in turn augment the consumption level of the general public, which in turn would raise the level of aggregate demand in the country (Arestis & Et. Al., 2002). Fiscal policies can lower the rate of unemployment by assisting to enhance the aggregate demand. Fiscal policies that should be employed are lowering of tax rates and also boosting the government expenditure. The rise in the government spending should complement the national income level that would check unemployment. Low rate of taxes would augment the disposable earnings of the citizens and as a result the consumption level of the public would also rise. This increase in the aggregate demand would have more than proportionate impact on the national income as a result of the multiplier effect. This would subsequently lead to an enhancement in the country’s GDP. The enhancement in the national GDP would lead to an enlargement in the demand for workforce to meet the requirements of the amplified consumption level. Thus, this would lower the level of unemployment that is caused due to the deficiency of demand (Baumol &...
The paper shows us a brief analysis of fiscal policies which can lower the rate of unemployment by assisting to enhance the aggregate demand. Fiscal policies that should be employed are lowering of tax rates and also boosting the government expenditure. The rise in the government spending should complement the national income level that would check unemployment. Low rate of taxes would augment the disposable earnings of the citizens and as a result the consumption level of the public would also rise. This increase in the aggregate demand would have more than proportionate impact on the national income as a result of the multiplier effect.
The paper approves that the multiplier effect would not be able to take place if there is no overall rise in the consumption level of the country. Certain economic advisors may not consider tax cut to be favorable because temporary measures such as reduction in the tax rates would not have much multiplier impact as compared to permanent measures
According to the paper the rising budget deficit would hamper the interest of the nation because with the rise in the deficit the government would have to pay higher rate of interest for financing the shortage and this would have a negative impact on the economic growth of the country. Moreover, the growing deficit would enlarge the national debt value and would result in higher rates of interest and taxes, which would affect the level of consumption as well as investment spending negatively
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