Identify policies a government can use to achieve economic growth.
The main policies governments can employ to achieve economic growth are demand and supply side policies. Demand side policies can increase aggregate demand in an economy during a period of recession. If there is spare capacity in the economy then these policies can play a part in increasing the rate of economic growth. Examples of demand side policies include cutting interest rates to stimulate consumer spending; applying quantitative easing and cutting taxes whilst increasing government spending.
Supply side policies aim to increase productivity and the efficiency of the economy. Lowering income tax and making labour markets more flexible are good examples, along with privatisation to increase efficiency.
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