Since there would be little point in increasing production if what is made cannot find a market, the level of aggregate demand in an economy is also important for growth. Macroeconomic Policies to stabilize aggregate demand--and particularly, to prevent or aid recovery from recessions--are thus crucial. Many nations, however, have suffered from bad macroeconomic policies that, though often intended to promote growth, have actually damaged the economy. A common policy error is to use excessive government spending to stimulate demand. Large budget deficits can offer short-term stimulation, but if continued almost always lead to severe inflation, which undermines stability and growth ON THE OTHER HAND, strict budget-balancing policies, often forced on developing countries by international lending agencies, can undercut ESSENTIAL INVESTMENT in human capital and infrastructure. Striking a good macroeconomic balance is often difficult for countries struggling to cope with the many difficulties involved in development. (Goodwin et. al)
Posted on: Sat, 30 Nov 2013 20:21:26 +0000
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