Economic growth and the role of government

The government plays a critical role in maintaining a nation’s continuous growth and progress. In developing countries, however, the government’s position has been reduced to legislation. The government seems to take an active part in ensuring that the country’s economy is going in the desired direction in emerging and less developed countries. This paper would concentrate on the role of government in economic stabilization (The Wall Street Journal).

The role of the government in economic stabilization

The observed steady growth in the economy’s production reflects the economy’s stabilization. This, in particular, leads to favorable job rates as well as price stability. To achieve this, the government plays its part in controlling the rates of taxation to ensure that individuals have sufficient amount of money to spend. The government uses the fiscal policies to stabilize economic growth. For example, when a country experiences high inflation rates, the government must impose economic policies which reduce the supply of money within the economy. This can be done increasing the taxation rate, rising cost of credit or issuing government securities at a high-interest rate to mop up extra money from the economy (The Wall Street Journal).

Similarly, when the economy is growing at a slower pace, the government has a responsibility to improve the growth rate by increasing the supply of funds in the economy. This can be done by reducing taxation rates thus promote investments by individuals with the aim of increasing employment as well as facilitate the production of goods and services for use within the country or the purpose of exportation (The Wall Street Journal).

Conclusion

As put forward, stabilization of the economy is a crucial role played by the government. Irrespective of the development status, the government has the responsibility of utilizing fiscal policies for the sole purpose of maintaining a desirable growth rate of the economy.

Works Cited

The Wall Street Journal. “The Experts: What Role Does Government Play in Spurring Innovation?” 21 April 2013. .