The role of economic policy in the growth process

The role of economic policy in the growth process

 

Economic growth is defined as a term that expresses the increase in the flow of money in a country in a certain period of time and thus the recovery of the economy of this country through increased production, investment, savings, unemployment reduction, raising the level of income for individuals, improving the standard of living and others. Or what is expressed as the change in the overall welfare of an economy over time.

  As for Economic Policy, it is a set of systems and tools that aim to improve the production process in a country. It also focuses on improving and developing the productivity and management of all and various sectors in the country, not just a specific sector, whether these sectors are tourism or agricultural, Or industrial, or investment or otherwise.

As long as the desired growth rate is determined by the ratio of output-capital and symbolized by (?) and the marginal propensity to save (MPS) symbolized by (1-b), what can be done from economic policy is to include changes in one of these two variables .
1- If the desired growth rate exceeds the natural growth rate, then the economic policy makers should reduce (?) or (1-b) or both. We can ignore the effect on the rate of output on capital ?, but the marginal propensity to save can be 1- b is maneuverable.
The marginal propensity to save 1-b, especially for those with high incomes, can be reduced through the policy of transferring incomes from those with high incomes to those with low incomes (tax policy), and this measure leads to a reduction in the desired growth rate.
An alternative policy can be followed, which is the policy of the competent authorities to encourage consumption for the outcome of the country's economy to reduce the value of (1-b).
2- If the desired growth rate is low, an opposite economic policy can be followed by shifting incomes from the poor to the rich to increase the marginal propensity to save and to encourage the economy in consumer spending to encourage the propensity to save, which is one of the slogans of the classical economists, in relation to their view of growth.
Government spending (G) and taxes (T) can be taken into consideration and study of their impact on the growth rate as part of government spending (spending on roads, dams, government buildings, ...) is a type of capital investment that Adds to production capabilities.

 

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