Macroeconomic Factors Affecting Economic Growth

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A nation 's economic performance depends on many factors, such as capital accumulation (physical and human capital), technological progress, institutions and population growth (Ben eta al, 2001 and P.Todaro & C.Smith, 2012). Another extremely important factor affecting economic growth is the set of macroeconomic policies of the economy. The three major types of macroeconomic policies are fiscal, foreign exchange and monetary policies.
Fiscal policy concerned on government spending and taxation which is linked to government expenditure plan and taxation structure of an economy (Black, Calitz, Steenekamp, 2013 and Ben, and Andrew, 2001).Studying the impact of fiscal policy on one country’s macro economy is very decisive to have a sound macroeconomic environment of a given nation. Since designing proper fiscal policy enables the government to attain economic objectives like reducing employment, price stabilization, income distribution, and economic growth. Not only the macro economy; fiscal policy has an impact on the micro economy through affecting households’ welfare.
The historic myth of fiscal policy starts from the classical economics pioneered by Adam Smith who was argued the government should have a limited role in the economy. This is basically associated to their view that government policies would be ineffective or counterproductive at achieving their stated goals. Since, most classical economists believe that the government should not try actively to eliminate

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