Economic growth is measured by an increase in gross domestic product (GDP), which is defined as the combined value of all goods and services produced within a country in a year. Many forces contribute to economic growth; unfortunately, no one is 100% clear about what these forces are or how to put them into motion. If this information was known, the economy, spurred by these forces, could grow at a constant rate unencumbered by recessions and stagnation.

Politicians and economists are forever holding debates on the different ideas trotted out with the promise of being economic panaceas. Measures taken to induce economic growth include infrastructure spending, deregulation, tax cuts and tax rebates.

Using Infrastructure to Spur Economic Growth

Infrastructure spending occurs when a local, state or federal government spends money to build or repair the physical structures and facilities needed for commerce and society as a whole to thrive. Infrastructure includes roads, bridges, ports and sewer systems. Economists who favor infrastructure spending as an economic catalyst argue that having top-notch infrastructure increases productivity by enabling businesses to operate as efficiently as possible. For example, when roads and bridges are abundant and in working order, trucks spend less time sitting in traffic and they don't have to take circuitous routes to traverse waterways.

Additionally, infrastructure spending creates jobs as workers must be hired to complete infrastructure projects that are green-lighted. It is also capable of spawning new economic growth. For example, consider the construction of a new highway, followed by gas stations and retail stores opening to cater to its motorists. (For related reading, see: Can Infrastructure Spending Really Stimulate the Economy?)

Stimulating the Economy With Deregulation

Deregulation is the relaxing of rules and regulations imposed on an industry or business. It became a centerpiece of economics in the United States under the Reagan administration in the 1980s, when the federal government deregulated several industries, most notably financial institutions. Many economists credit Reagan's deregulation with the robust economic growth that characterized the U.S. during most of the 1980s and 1990s. Proponents of deregulation argue tight regulations constrain businesses and prevent them from growing and operating to their full capabilities. This, in turn, slows production and hiring, which inhibits GDP growth. However, economists who favor regulations blame deregulation and a lack of government oversight for the numerous economic bubbles that expanded and subsequently burst during the 1990s and early 2000s.

Tax Cuts and Tax Rebates

Tax cuts and tax rebates are designed to put more money back into the pockets of consumers. Ideally, these consumers spend a portion of that money at various businesses, which increases the businesses' revenues, cash flows and profits. Having more cash means businesses have the resources to procure capital, improve technology, grow and expand. All of these actions increase productivity, which grows the economy. Tax cuts and rebates, proponents argue, allow consumers to stimulate the economy themselves by imbuing it with more money. (For related reading, see: Do Tax Cuts Stimulate the Economy?)

  1. What do economists believe causes economic growth?

    Learn the different theories for what economists believe causes economic growth, including the big differences between supply-side ... Read Answer >>
  2. What is the role of deficit spending in fiscal policy?

    Read about the role deficit spending can play in a government's fiscal policy, and learn why economists are torn about the ... Read Answer >>
  3. What's the difference between monetary policy and fiscal policy?

    Discover the distinctions between these two tools designed to influence national economies. Read Answer >>
  4. Has deregulation helped or hurt the profitability of companies in the telecommunications ...

    Read about the impact of deregulation on the U.S. telecommunications sector, particularly with regards to the profits of ... Read Answer >>
  5. How does revolving credit differ from a general line of credit?

    Examine the consumer goods sector, which accounts for nearly one-third of consumer spending, and learn which goods account ... Read Answer >>
Related Articles
  1. Insights

    How Trumponomics Might Boost the Stock Market

    Shedding previous pessimism, a rising number of investors and analysts now say Trump's major initiatives on infrastructure spending, tax cuts and deregulation will fuel the stock market toward ...
  2. Insights

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  3. Taxes

    Why America's Taxes Are Too Low

    The solution to America's economic woes may not be in lowering taxes further, but may, in fact, lie in increasing them.
  4. Personal Finance

    How Mail-In Rebates Rip You Off

    These common strategies often leave consumers holding the bill.
  5. Investing

    How to Get a Rebate and Save on Buying a Home

    When you're looking for a new home, you can save thousands if you find a real estate broker willing to offer a rebate.
  6. Insights

    What is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy, also known as fiscal policy.
  7. Investing

    Infrastructure Spending: Watch the U.S. Fall Behind

    President Trump is calling for $1.5 trillion in infrastructure spending. We need it.
  8. Insights

    Free Markets: What's The Cost?

    Some argue that when the free market fails to protect consumers, government regulation is required.
  9. Taxes

    Parties For Taxes: Republicans Vs. Democrats

    Read about the political parties' differences in tax ideology, and how it can affect your paycheck.
  10. Insights

    As Trump Turns to Infrastructure Promise, Data Show State and Local Govts Pay Most

    While the federal government certainly plays a role, the largest share of investment in infrastructure in the United States is financed at the state and local level.
  1. Economic Forecasting

    Economic forecasting is th process of attempting to predict the ...
  2. Fiscal Policy

    The use of government spending and tax policies to influence ...
  3. Rebate Option

    An offer to consumers for a cash discount on the purchase of ...
  4. Infrastructure

    The basic physical systems of a business or nation. Transportation, ...
  5. Keynesian Economics

    Keynesian economics is an economic theory of total spending in ...
  6. Real Economic Growth Rate

    A measure of economic growth from one period to another expressed ...
Hot Definitions
  1. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center