A key macro-economic objective of many governments around the world is positive economic growth; due to the perceived benefits/advantages that growth brings to the economy and people - Essay Example

Effect of Positive Economic Growth al Affiliation Effect of Positive Economic Growth Economic growth is measured over a specified period. Department for International Development defines economic growth as a trend where a country’s production increase in an attempt to satisfy demand for services and good using improved infrastructure. The government focuses on the positivity of economic growth, which is measured by the country GDP, money supply and consumer Price Index (CPI). Positive indication prompts the government to set plans due to the perceived advantages that growth brings to the economy and people.

Different indicators prompt the government to set both short and long- term development plans. Strategies designed by government and other regional organisation would determine the nature in which economic growth benefits the people and economy. GDP is an element that measures economic growth of a given country. The indicator takes into account final good and service’s market value over a specified period. While measuring GDP only products bought by final end users within a given country both local and foreign residence.

The government uses real GDP to position itself among other states. Growth in GDP will imply that the government enjoins other institutions to create employment opportunities for its population. China projects its annual GDP to improve to 7.5 % this has prompted the national government policy makers to focus on increasing their spending on infrastructure and create mechanisms that will enhance “consumption growth” (BBC, 2014). The government uses economic growth to model both fiscal and monetary policy to increase future GDP worth and increase resources used in infrastructure development and limit resources channelled in dealing with unemployment and other social problems relating to negative economic growth.

Economic growth puts into account the rate of inflation and the Consumer Price Index is a tool used to measure the amount of economic growth. US department of Labour (2014) indicates an increase of 1.7 percent from 2013 to 2014. This indicates an increase in purchasing power amongst its citizens. The increased CPI indicates a lower inflation rate hence the government would use this statistics to attract more investors. The government will also use this rate to encourage firms to employee more people to boast their production.

Increased production would mean an increase in the government taxes through excise duties and other taxes. The government hence have had enough resources to invest in the country’s security infrastructure and fight terrorism. The country has also experienced increased purchasing power and impressed levels of exports. The government uses the low inflation as a tool to increase revenue collection through both monetary and fiscal policies. Low inflation rates and improved GDP ratio combines with money supply to determine government policy based on economic growth.

Money supply refers to the amount of money supply in the economy and the reserve amounts set aside. The levels of money supply will determine the GDP of a given country. Just as real GDP, the government uses money supply to determine the economic growth (Borensztein et al, 1998). The government uses the monetary supply policy to stabilize the economy through reducing inflation rate. The United Kingdom has had its fair share at inflation. The government gauges its reserves based on the economic situation of a country.

The increased lending power in the UK is because of economic growth. Enough credit is available to the banks to lend local consumers (Wadsworth, 2013). The government then engages in other measures to ensure available resources are invested into the infrastructural projects and excess supply invested into other government projects. Economic growth may have a negative effect on the government policy on development. The government may use other indicators, which in real sense would otherwise be void in the particular scenario.

This may result in poor planning hence conflicts arises due to failed monetary and fiscal policies (Levine, 1997). The government may ignore the inequality and available resource allocation and use the urban statistic to generalise the findings of a given model. These inaccurate statistics used to forecast plans might lead to misplaced budget and targets. GDP and other indicators need to focus on all aspect of the economy (Holcombe, 2007). In conclusion, the government may use the economic growth to its advantage.

Resources and efforts that would rather been used to stabilize economy would be channelled to developments and creation of employment opportunities. This will mean that the government creates a secure environment for foreign investment. These benefits will only be realised only when the government effectively combines monetary and fiscal policies in stabilizing the economy. Various countries deploy measures that will ensure economic growth and do so due to the perceived advantages that growth brings to the economy and people.

Reference BBC. (2014, July 16).Chinas economic growth picks up. BBC news. Retrieved from http://www.bbc.com/news/business-28305184 Borensztein, E., gregorio, D., & Lee, J. (1998). How does foreign direct investment affect economic growth . Journal of International Economics ,45 : 115–13 Holcombe, R. (2007). Entrepreneurship and Economic Progress. New York: Routledge Levine, R. 1997.Financial Development and Economic Growth: Views and Agenda Journal of Economic Literature, 35. 2. : pp. 688-726 US department of Labour. (2014). Consumer Price Index- September 2014.

Retrieved from http://www.bls.gov/news.release/pdf/cpi.pdf Wadsworth, J.2013.The Banks and the Monetary System in the UK, 1959-1971. London: Routledge