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List five policies that encourage growth.
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<strong>1. Monetary Policy</strong>. Monetary policy is the most common tool for influencing economic activity. To boost AD, the Central Bank (or government) can cut interest rates. Lower interest rates reduce the cost of borrowing, encouraging investment and consumer spending. Lower interest rates also reduce the incentive to save, making spending more attractive instead. Lower interest rates will also reduce mortgage interest payments, increasing disposable income for consumers.</p> <p></p> <p><img src="https://www.economicshelp.org/blog/wp-content/uploads/2011/12/uk-base-rates-growth-07-11.png" alt="econ-growth" width="450" style="height: auto; max-width: 100%;"></p> <p>Base rates cut to 0.5% to try and stimulate economic growth in the UK.</p> <p><strong>Evaluation of Monetary Policy</strong>. Lower interest rates may not always boost spending. In a liquidity trap, lower interest rates may not boost spending because people are trying to pay back debts. In 2009, UK interest rates were cut to 0.5% but XXXXXXXX remained XXX. Banks were unwilling XX XXXX XXXXXXX of liquidity XXXXXXXXX. XXXXXXXXX, XXXXXXXX in theory, it XXX cheap to XXXXXX, it XXX hard to actually XXXXXX XXXXXX. XXXXXXXXX, XXXX shows XXXXXXXX XXXXXX XXX XX XXXXXXXXXXX in XXXXXXXX XXXXXXXX growth</p> <p>Another XXXXXXXXX of monetary XXXXXX, XX XXXX cutting XXXXXXXX rates very XXX could XXXXXXX future XXXXXXXX XXXXXXXX. XXX XXXXXXX, the XX XXX interest XXXXX XXXXXXXXX the XXXXXXXX XXXXXXXXXXX of 9/11. XXXXX XXX XXXXXXXX XXXXX XXXXXXXXXX people to XXXX XX ambitious XXXXX XXX mortgages; XXXX XXX a factor behind the XX XXXXXXX bubble. Therefore XXXXXXX interest rates, XX XXX XXXXX time, XXX contribute XX a XXXXXX XXXXXXX and asset bubble which XXXX XXXXXXXXXXX XXXXXXXX growth. XXXXXXX, in XXXX-12, XXX depth XX the XXXXXXXXX XXXXXX XXXXX there XX no XXXXXXXXX XXXXXX of a housing bubble, so it XXX appropriate to XXXX XXXXXXXX XXXXX at zero.</p> <p><strong>X. XXXXXXXXXXXX Easing.</strong>In a XXXXXXXXX trap, where lower XXXXXXXX XXXXX XXXX to boost demand, the Central Bank XXX XXXX to XXXXXX more unconventional types of monetary XXXXXX.<a href="https://www.economicshelp.org/XXXX/XXXX/economics/XXXXXXXXXXXX-XXXXXX/">Quantitative easing</a>involves increasing the money supply XXX buying XXXXX to keep XXXX rates low. XXX hope is XXXX XXX XXXXXXXX in XXX money XXXXXX XXX lower XXXXXXXX rates will boost XXXXXXXXXX and XXXXXXXX XXXXXXXX. The XXXX is that XXXXXXXXXX XXX XXXXX supply could XXXXX XXXXXXXXX. XXXXXX evidence from 2009-12 suggests XXXX XXX XXXXXXXXXXXX XXXXXX was minimal. XXXXXXX quantitative easing, XXX XXXXXXXXX was XXXXXX to XX deeper, XXXXXX XX XXXXX XXXXXX XX XXXXXX XXX XXXXXXX back to a XXXXXX growth XXXXXXXXXX.</p> <p><span></span></p> <p><strong>X. Fiscal XXXXXX</strong>. XXX XXXXXXXXXX XXX boost XXXXXX by XXXXXXX XXX and XXXXXXXXXX government spending. Lower income XXX XXXX increase XXXXXXXXXX XXXXXX, XXXXXXXXXXX consumer spending. Higher government XXXXXXXX XXXX create jobs and provide an XXXXXXXX stimulus.</p> <p>XXX XXXXXXX XXXX XXXXXXXXXXXX XXXXXX XXXXXX XX XXXX it XXXXX to an increase in XXXXXXXXXX borrowing. XX finance XXXX XXXXX spending, the XXXXXXXXXX XXXX to XXXXXX XXXX the XXXXXXX sector. If XXX economy is already growing, then XXXXXX government XXXXXXXXX can<a XXXX="XXXXX://www.economicshelp.XXX/XXXX/XXXX/economics/XXXXXXXX-out/">crowd out</a>the XXXXXXX XXXXXX. Expansionary fiscal policy is also criticised by those who fear it XX an XXXXXX XX XXXXXXXXXXX increase XXX XXXX of XXX XXXXXXXXXX sector.</p> <p>However, if the XXXXXXX sees a XXXXX XXXX in private spending, XXX XXXX in the saving XXXXX, expansionary XXXXXX policy can help provide a boost XX demand in the XXXXXXX without XXXXXXX crowding out.</p> <p><img XXXXX="XXXXXXXXXXX" XXX="https://www.XXXXXXXXXXXXX.XXX/XXXX/wp-content/XXXXXXX/XXXX/XX/XX-saving-XXXXX-2012.jpg" alt="saving" width="XXX" style="XXXXXX: auto; XXX-width: 100%; clear: both; XXXXXXX: block; XXXXXX-right: auto; XXXXXX-XXXX: XXXX;"></p> <p>This graph shows a XXXXX XXXX in private XXXXXX XXXXX recession XX 2008. X rise in saving means that there XX XXXXXX to XX a deficiency XX aggregate demand (<a href="https://XXX.economicshelp.org/XXXX/5214/economics/great-XXXXXXXXX-v-great-XXXXXXXXXX-of-1930s/">UK had longer recession XXXX XXXXX</a>) XX XXXX means there XXXX be XXXXXX demand for government bonds. XX XXXX, the UK could borrow at XXXX low interest rates. Therefore, XXXXXXXXXXXX XXXXXX policy could XXXX been XXXX to XXXXX spending XXXXXX XXXX XXX XXXXXXXX.</p> <p>The aim XX expansionary fiscal policy is for XXX XXXXXXXXXX XX XXXXXX the XXXX in private sector spending. XXXXXXXXX, XXXXXX a XXXXXX of XXXXXXXX XXXXXXXXX, the XXXXXXXXXX may XXXX XX XX XXX XXXXXXXX XX higher XXXXX and lower spending to XXXXXX a XXXXXX surplus.</p> <p><strong>3. Devaluation</strong></p> <p>XXX countries stuck in a fixed XXXXXXXX XXXX. XXXXXXXXXXX can help restore competitiveness XXX boost XXXXXXXX XXXXXX. X fall in the exchange XXXX makes exports XXXXXXX XXX imports XXXX XXXXXXXXX.</p> <p>XXX XXXXXXX, Argentina XXX XXXXXXX both had rapid XXXXXXXXXXXX, which in XXX medium term helped their economic recovery. The XX XXXX benefited XXXX<a href="http://econ.economicshelp.org/2008/XX/XXXXXXXX-XXXX-mechanism-crisis-XXXX.html">leaving the XXXXXXXX XXXX XXXXXXXXX in 1992</a>.</p> <p>The XXXXXXXXXXXX XX XXXXXXXXXXX XX XXXX it can XXXX to short-XXXX economic pain. XXXXXX XXXXXX prices increase inflation XXX XXXXXX standards XX XXXXXX. XXXXXXXXXXX XX also seen as a XXXX XX XXXXXXXX and political weakness.</p> <p>XX the XXXX XX XXXXXXXX XXXXXXXXX, devaluation XX needed (XXX:<a XXXX="https://www.XXXXXXXXXXXXX.org/XXXX/3091/XXXXXXXXX/competitiveness-in-XXXXXX/">XXXXXXXXXXXXXXX in XXXXXX</a>), but it is much harder to devalue XXX XXXXX the exchange XXXX XXXXXXX of XXX XXXXXXXXXX of XXXXXXX flight.</p> <XX> XXXXXXXXXXX of Demand XXXX Policies</XX> <p>Demand XXXX XXXXXXXX XXXXXX XXXXXXXX XXX rate XX growth above the long XXX XXXXX rate XXXXXXX causing unsustainable boom and XXXX.</p> <p>For example, in XXXX, the XX XXXXXXXXXX, Anthony XXXXXX announced a ‘dash XXX XXXXXX’. XXXXX XXXX cut against a XXXXXXXX of rising XXXXX XXXXXX and inflation. XXXX led to XXX XXXXXX XXXX – rapid economic XXXXXX. XXXXXXX, it also caused a spike in inflation XXX the XXXXXX proved unsustainable.</p> <p><XXX XXXXX="XXXXXXXXXXX" src="https://www.XXXXXXXXXXXXX.XXX/XXXX/wp-XXXXXXX/uploads/2011/02/XXXX-XXXXXX-86-XXX-500x369.XXX" alt="growth" width="XXX" style="XXXXXX: auto; XXX-width: XXX%; clear: both; XXXXXXX: block; XXXXXX-right: XXXX; margin-XXXX: auto;"></p> <p>In the 1980s, XX repeated XXXX XXXXXXX by loosening XXXXXXXX XXX fiscal policy. This XXX XX XXXX XXXX XXXXXX XXX XXXXXXXXX. XXXX XXXXXX proved XXXXXXXXXXXXX, XXXXXXX XX XXX recession of 1991-92.</p> <p>XX some cases, demand side XXXXXXXX need XX XX used to limit XXX growth XX aggregate demand. XX XX XXXXXXXXX XX avoid an XXXXXXXX XXXX, where growth XXXXXX XXXXXXXXXXXXX and XXXXXXXXXXXX. XXXXXXXX AD XX XXXXX XXXX and XXXX cycles can help provide a longer period of XXXXXXXX expansion.</p> <h3>Supply Side XXXXXXXX</h3> <p>The alternative XXXXXXXX XXX XXXXXXXXX economic XXXXXX XX to XXX XXXXXX side policies. XXXXX attempt to increase productivity XXX efficiency XX the economy. <strong>XXXXX XXXXXX XXXXX</strong>. XX is XXXXXX XXXXX XXXXXX tax can XXXXX XXX incentive to XXXX XXX XXXXXXXX labour XXXXXX. XX XX XXXXXXXX, XX XXXXXX XXXXX were excessive, then cutting them may encourage XXXXXX XX XXXX more. XXXXXXX, XXXX XXXXXXXX XX XXXXX XXXXXXXXXXX. XXXXXXXX basic rate XX XXXXXX tax from 23% to XX%, XXXXX have very XXXXXXX impact XX labour supply. XXXX a XXX XXX, there is XXXX an XXXXXX and substitution XXXXXX. XXX XXXXXX XXXXXX XXXXXX that higher taxes XXXX people work XXXXXX hours to achieve their target XXXXXX. (<a XXXX="XXXX://econ.XXXXXXXXXXXXX.XXX/2008/XX/economics-of-XXX-XXXX.html">XXXXXXXXX of tax cuts</a>)</p> <p><XXXXXX>XXXXXXXX XXXXXX markets</strong>. Highly regulated XXXXXX markets, XXXX XXXXXXXXX XXXXXXXXXX may XXXXXXXXXX firms from employing XXXXXXX XXX XXXXXXX up in XXX XXXXX place. XX is argued that XXXXXXXXX XXXX XX France have XXX XXXX labour market restrictions, such XX cost XX XXXXXX workers, XXXXXXX XXXXXXX week and XXXXXXX wages. XXXX flexible labour markets can XXXX provide a long XXXX XXXXX to investment. XXXXXXX, XXXXX XX a trade XXX. XXXX flexible XXXXXX XXXXXXX could XXXXXXXX job XXXXXXXXXX XXX XXXX XX harmful XXXXXXX XX labour XXXXXXXXXXXX.</p> <p><XXXXXX>XXXXXX Union relationships</XXXXXX>. XX XXX XXXXX, XXX XX XXXXXXX XXXXXXXX because of poor XXXXXXXXXX XXXXXXXXX. There XXXX XXXXXXXX strikes XXXXX stopped XXXXXXXXXX. With an adversarial XXXXXXXX it XXX XXXXXXXXX to promote more labour efficient XXXXXXXXXX processes. Reducing XXX XXXXX XX XXXXXX XXXXXX can help XX improve XXXXXX productivity.</p> <p><XXXXXX>XXXXXXXXXXXXX XXX deregulation.</XXXXXX> XXXXXXXXXXX industries XXX XXXXXXXX efficiency as XXXXXXX XXXXX have a XXXXXXX profit incentives to cut costs and XXXXX productivity.</p> <h3>Limitations XX Supply XXXX Policies</h3> <p>Supply side XXXXXXXX can take considerable time. XXX example, if you XXXXXXXX in XXXXXX XXXXXXXXX and training, it could XXXX XXXXXXX XXXXX for XXXX XX XXXX to XXXXXX labour productivity.</p> <p>XX a recession, XXXXXX side XXXXXXXX are not XXXXX to solve XXX XXXXXXXXXXX problem of XXXXXXXXXX XX aggregate XXXXXX. In a XXXXXXXXX XXXXXXXXXX flexibility of labour markets XXX encouraging XXXXXXXXXX XXX help XX some XXXXXX. XXX, XXXXXX XXXXX is XXXXXXXXXX XXXXXX, firms will be reluctant to XXXXXXXX production XXX set XX XXX XXXXXXXX ventures. For example, in<a XXXX="XXXXX://XXX.XXXXXXXXXXXXX.org/blog/5245/XXXXXXXXX/how-XX-deal-with-XXXXX-XXXXXXXXXXXX/">how to XXXX XXXX youth XXXXXXXXXXXX,</a>the XXX XXXXXXXXX XXXXXXXXX a ‘growth XXXX’. But, this growth pact XX only XXXXXXXXXXX supply side XXXXXXXX XXX not the XXXX XX XXXXXX in XXXXXXXXX with XXXX XXXXXXXXXXXX.</p> <p>XXXXXXXXXXX often over-XXXXXXXX XXX potential XXX supply side policies XX improve the long term XXXXXX rate. XXX example, in XXX 1980s, the XX pursued several XXXXXXXXXX successful XXXXXX XXXX XXXXXXXX (privatisation, XXXXXX XXXXX of unions, XXXXX XXXXXX tax). But, there was no XXXXXXXX XXXXXXX, XXXX XXXXXX went above the XXXX run XXXXX rate of 2.X% – it proved XXXXXXXXXXXXX XXX led to boom and XXXX.</p> <p><br></p>">
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