Chapter 37 // Government Economic Policy

A policy

A set of rules or guidelines that an organization follows.

Government economic policy

How the government tries to influence the economy.

Main goal of government economic policy

Create a stable economy.

Name three goals of government economic policy

Full employment, low inflation, and economic growth.

Fiscal policy

How the government decides on taxes and spending to achieve its economic goals.

Monetary policy

Controls the money supply, interest rates, and manages inflation.

Industrial policy

Supports the growth of the primary, secondary, and tertiary sectors of the economy.

Foreign direct investment (FDI)

When a foreign company invests in a country

- building a factory to produce and sell goods or services.

Primary sector

Extractive industries

using natural resources to produce

Secondary sector

Manufacturing and construction industries turning raw materials from the primary sector into other goods, e.g., builders.

Tertiary sector

Service industries providing services

medical, financial, and transport

Indigenous firms

Businesses owned and established by local people.

Direct intervention policy

Government creates semi-state enterprises to provide goods and services not offered by the private sector.

Cost-benefit analysis

An assessment of economic policy where the benefits should outweigh the costs.

Grants for FDI

Create jobs.

Decreasing tax rates

Benefits employees