Policies To Stimulate Growth

Question 1

Fiscal discipline

Answer 1

Keeping control of government budget deficits and national debt so taxes can remain low to help drive investment and competitiveness

Question 2

Reallocating state spending

Answer 2

Away from what free market economists regard as market distorting subsidies towards basic health care, improved education and infrastructure

Question 3

Tax reforms

Answer 3

Including widening the base of taxation and encouraging lower tax rates to raise interiorise and work incentives - link to the ladder curve

Question 4

Liberalising interest rates

Answer 4

Allowing financial markets more freedom in setting interest rates on savings and loans and letting market interest rates allocate financial capital among competing uses

Question 5

Exchange rates

Answer 5

A free market economist supports a choice of fixed or free floating exchange rates but has a preference against ‘dirty floating’ i.e. Intervention to manipulate the value of a currency

Question 6

Trade liberalisation

Answer 6

A gradual reduction in import tariffs and other forms of protectionism- trade in goods and services is seen as important for growth and development

Question 7

Liberalisation of inwards FDI

Answer 7

Capital investment between countries

Question 8

Privatisation

Answer 8

Transferring state owned enterprises into the private sector in order to improve economic efficiency and drive higher productivity and per capita incomes

Question 9

Deregulation

Answer 9

Ie lowering entry and exit barriers in markets but not necessarily at the expense of necessary regulation of aspects such as working conditions and employment rights

Question 10

Property rights

Answer 10

Protecting intellectual and other rights to encourage innovation and risk taking