How Does the Government Help the Growth of the Economy?

Topics: Economic growth, Economics, Macroeconomics Pages: 2 (641 words) Published: January 1, 2013
How does the government help the growth of the economy?
It is a fact that no society throughout history has ever obtained a high level of economic affluence without a government. Economic growth is a term that is generally measured through GDP the gross domestic product in a country or region over a certain period of time and its consisted of economists, governments and individuals Economic growth usually results from producing more goods and services that requires productivity growth. Productivity growth may also requires some combination of:

(1) A more educated and efficient workforce – taxes, governments create an effective elementary, secondary and tertiary system of education. (2) More private physical capital, such as factories and tools – people are able to purchase land and decide what they want to do with it, they have the freedom to choose the lives they want to live, the businesses they want to create and to whom they will sell their goods. They will be motivated by profit as governments allows them to keep these, and they may at some time be taxed to assist in creation of public goods and infrastructure. They also reinvest the money to increase potential. (3) Increased use of new technology – always assume free thought to create new ideas, and again, efficiency and right to ownership are incentives. (4) More public infrastructure like roads and other utilities – governments create these to assist the flow of business transactions and movement of goods and people. (5) Markets to set prices and rule of law to enforce contracts When government spends a lot of money on goods to promote economic growth. But as government spends more money, It eventually will loses money and that will effect the growth of the economy. The economic growth will decreases when the government doesn’t get involved in the economy, or when it’s 100% involved, so it has to be balanced. After many years of academic studies it has been shown that government spending typically...
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