If a nation chooses to reduce consumption and increase investment, how would this affect economic growth?...
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?
Homework Answers
Reduction of consumption means that consumption demand for goods and services fall and savings increases . This savings is then invested in forms of loanable funds . So increasing investment expenditure means more production of capital goods and production and less production of consumer goods . Economic growth will definitely accelerate but at some point consumption should also not be neglected and reduced to a very low level because demand for consumer goods forms the most important part of aggregate demand in the economy . Decline in aggregate demand can cause fall in growth .
In order to increase productivity other public policies that can be adopted are : tax rebates , incentives for excellent performance at workplace , subsidies to weak industries etc .
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small island country whose only industry is fishing. When people
aren't fishing, they're enjoying leisure time with their
families.
Which of the following policies would lead to greater economic
growth? Check all that apply.
Imposing a tax on fishing boats (a form of capital)
Lowering the income tax, assuming that it encourages people to
work longer hours
Subsidizing research and development into new fishing
technologies
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