The impact of Government policies on the economy .
Introduction:
Government policies shapes the business environment environment, influence customer behavior and also stimulate growth or hinder growth.The following are some government policies and its impact on the economy.
- Monetary policies:
Central banks implements monetary policies by adjusting the interest rates and regulating money supply.Reducing interest rates lead sto an increase in taking loans, spending and investing,while increasing interest rates would reduce inflation and stabilize prices.The interest rates promotes growth while money supply restrict growth.
2. Fiscal policy or Government spending:
While government spending drives the economic growth on Nigeria, Government revenues have no effect on the growth of the economy.
3. Trade policies:
Policy makers should make use of interest rates as it stimulates the growth of the economy.Free trade agreements can expand markets and reduce prices whereby restricting international trade can limit choice,cause trade wars and lead to an increase in price.
4. Taxation:
Taxation influences the volume and size of production and the pattern of production. Progressive taxation can reduce income inequality while tax breaks encourages innovation and business development .
5. Regulatory environment:
Regulated industries experience fewer entrants into the market each year,this negatively affects the economic growth in the long and short run.
Conclusion:
Effective policies can promote economic growth, reduce inequality and improve standards of living.While poorly designed ones can cause inflation and social unrest.
