In an open economy, the government can accelerate growth by:

Question

Quizplus · Accepted Answer

By taxing consumption and using the tax revenues for capital formation, the government can encourage domestic investment and saving. This in turn can lead to higher domestic production and export competitiveness, which can accelerate growth in an open economy. Importing consumption goods and increasing government spending on consumption do not necessarily promote domestic production or export competitiveness, and taxing investment may discourage domestic investment and hinder growth.

In an Open Economy, the Government Can Accelerate Growth By