Description
How does the type of economic system determine the growth and stability of a nation?
Explanation & Answer
First we have to understand the what is the economic growth & economic stability. Economic growth is an increase in the production and consumption of goods and services. It requires increasing population and/or per capita consumption. It is indicated by increasing gross domestic product (GDP). Economic stability refers to an absence of excessive fluctuations in the macro economy. An economy with fairly constant output growth and low and stable inflation would be considered economically stable. An economy with frequent large recessions, a pronounced business cycle, very high or variable inflation, or frequent financial crises would be considered economically unstable.
Some policies should be promote for stability of a nation
Fiscal stabilisers Some policies should also be promote for sustainable growth of nation Technology policy Human Capital development reducing red-tape and de-regulation providing incentives tax reform
Floating exchange rates
Flexible labour markets
Monetary policy
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