Omer Suleman Three Government initiatives or policies they are using to stimulate economic growth.

What macroeconomic indicators is it affecting? Economic growth is best defined as a long-term expansion of the productive potential of the economy. Sustained economic growth should lead higher real living standards and rising employment. Short term growth is measured by the annual % change in real GDP. All Economies endure fluctuations in their economic activity over a period of time, this is known as an economic cycle, it portrays how the GDP of a country goes up and down. An aim all economies will strive for is to keep their Economic Growth sustained and constant, considering the longevity of all the policies they initiate. In this essay I will attempt to explore three government policies which will sustain economic growth. Firstly, the monitoring and constant changes in monetary variables such as the money supply or interest rates. High interest rates will discourage firms to spend on investments and households spend less on consumption. The cost of borrowing for both consumption and investment purposes becomes daunting and therefore borrowing drops. The Monetary policy is known to affect GDP as its Macroeconomic indicator. This is because interest rates have major influence on aggregate demand, for example if interest rates are high, high street banks will increase their rates charged on loans, this penultimately prevents the incentive to borrow and encourages saving and therefore ultimately reduces the growth of aggregate demand, this will increase the fluctuations endured by an economy deeming it unstable. On the contrary, interest rates can also increase aggregate demand, this is done by setting interest rates low, consequently encouraging borrowing and spending and discouraging saving therefore resulting in higher spending and higher aggregate demand. Secondly I will discuss one of the main policies that are used in the UK today, this is Fiscal policy. Fiscal describes the changes in government expenditure and taxation, it is used to influence predominately aggregate demand although it is increasingly being implemented in the use of aggregate supply. When government spending is greater than money made through taxation, this creates a deficit and affects economic growth negatively. If the economy is unstable due to a big deficit it may endure a recession or even worst yet a slump, this will result in firms making employees redundant therefore increasing government expenditure on social security. The Fiscal policy will create an incentive for Governments to strive for equality between expenditure and gains. This will therefore encourage governments to increase taxation if suffering from a budget deficit, resulting in overall sustained growth. The indicator affected through this policy is the CPI indicator. Lastly is the supply side policy. This is designed to increase the economys aggregate supply and hence shift supply curve to the right. When coincided with good aggregate demand this policy effectively allows Governments to reach their Macroeconomic objectives. The supply side policy is usually recognised as a Microeconomic policy as it is designed to make markets operate more efficiently and therefore lead to quicker but sustained economic growth. Some of the measures taken for this policy to be fully enhanced are the improvement of education and training and labour altogether, reducing the burdens of taxes through replacements of direct taxes with indirect taxes and finally reforming welfare benefits, by reducing benefits people are enticed to take lower paying

jobs rather than be unemployed therefore lowering unemployment. Overall the supply side policy aims to equip the economy with fast paced sustainable growth. Overall these three economic sustainability policies are initiated to ensure that growth is constant but also sustained. Reducing fluctuations in the Economic Cycle and improving the relationship between aggregate demand and supply resulting in high levels of employment, improvements in living standards, low inflation and ultimately steady and sustained growth, all major economic objectives for all economies.