By having the two concepts of fiscal policies and monetary policies, a government can control growth of a country. According to Samuelson and Nordhaus (2010), "Fiscal policies involve the government's power to tax and the power to spend. Monetary policies involve determining the supply of money and interest rates." Governments intervene to solve high unemployment rates, high inflation rates, and slow economic growth, using the monetary and fiscal policies. Concerning fiscal policies, having the government decrease taxes, or increase the public's spending, like public health, building roads, etc will. "Lower taxes increase disposable income and therefore help to increase consumption, leading to higher aggregate demand" (Pettinger, 2011). With that happening, there will be more job opportunities available, leading to the decrease of unemployment rates. Regarding monetary policies, the government could decrease the interest rate. Pettinger (2011) states, "Lower rates decrease the cost of borrowing and encourage people to spend and invest." Having the government intervene in the market to do that will cause the country to grow and stabilize the country. Therefore, government intervention in the market is
By having the two concepts of fiscal policies and monetary policies, a government can control growth of a country. According to Samuelson and Nordhaus (2010), "Fiscal policies involve the government's power to tax and the power to spend. Monetary policies involve determining the supply of money and interest rates." Governments intervene to solve high unemployment rates, high inflation rates, and slow economic growth, using the monetary and fiscal policies. Concerning fiscal policies, having the government decrease taxes, or increase the public's spending, like public health, building roads, etc will. "Lower taxes increase disposable income and therefore help to increase consumption, leading to higher aggregate demand" (Pettinger, 2011). With that happening, there will be more job opportunities available, leading to the decrease of unemployment rates. Regarding monetary policies, the government could decrease the interest rate. Pettinger (2011) states, "Lower rates decrease the cost of borrowing and encourage people to spend and invest." Having the government intervene in the market to do that will cause the country to grow and stabilize the country. Therefore, government intervention in the market is