Answer to Question #49439 in Macroeconomics for layal

Question #49439
1)If you are policy maker then what four steps you would take in order to increase economic growth rate.You are also required to explain these four step in the relevance of economic growth? 2)Recently Govt of Oman has decided to increase the taxes on tobacco product. how this decision is going to impact the economy and society of Oman, explain in details?
Expert's answer
1) Economic growth is the increase in the market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real GDP.
If you are policy maker then the four steps you would take in order to increase economic growth rate are:
1. Demographic changes.
Demographic factors influence growth by changing the employment to population ratio and the labor force participation rate.
2. Increases in productivity.
Increases in productivity have historically been the most important source of real per capita economic growth. Increases in productivity lower the cost of goods, which is called a shift in supply.
3. Income equality.
According to research by Harvard economist Robert Barro, there is "little overall relation between income inequality and rates of growth and investment".
4. Gross phases and sector shares.
Economic growth in the U.S. and other developed countries went through phases that affected growth through changes in the labor force participation rate and the relative sizes of economic sectors.
2) The increase of the taxes on tobacco product is going to impact the economy and society of Oman.
The proposal to raise the federal excise tax on tobacco products and use the additional revenue to expand preschool education could achieve the dual goals of reducing the number of premature deaths due to smoking and raising an additional revenue over ten years.
Tobacco taxes are a proven strategy to reduce smoking, particularly among teenagers and low-income people.

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