2. Economic Performance - Economic Growth, Policies to promote it

Question 1

What did the government need to do to improve short run economic growth?

Answer 1

Boost aggregate demand

Question 2

What policies could the government use to promote short run economic growth?

Answer 2

Expansionary monetary policy or expansionary fiscal policy could be used to boost aggregate demand.

Question 3

What are the potential problems with the policies to promote short run economic growth?

Answer 3

They may create demand pull inflation, this will depend on initial level of economic activity (where you are when your SRAS curve)

Question 4

What are the possible government policies to promote long run economic growth?

Answer 4

Using supply-side policies to boost the PPF outwards.

Question 5

What are the potential problems with the policies to promote long run economic growth?

Answer 5

They’re very expensiveThey take time to workThere’s no guarantee they’ll workDepends on the initial level of economic activity