Answer to Question #313420 in Macroeconomics for Ntd

Question

How can policy makers (government) use the neoclassical model of production and consumption to inform policy decisions in the economy?

Answer 1

The government can have in place the following policies;

1) Lowering taxes to stimulate aggregate supply and economic growth.

2) Reducing government spending–they can spend on national defense, but not much for transfer policies like Social Security, Medicare, Medicaid or other types of welfare spending.