1. HELPING GROWTH IN OTHER COUNTRIES
MACROECONOMICS
ECON224-1104B-22
PROF. HECTOR MORALES
VICTORIA ROCK
DECEMBER 11, 2011

2. INTRODUCTION
There are several things to look at when trying to encourage the growth of newly industrialized
countries. Here we will discuss two ways that many countries have used and are still using
today.

3. WAYS OF ENGOURAGING GROWTH
There are two methods which encourage firms to grow, and are used worldwide, including
Hong Kong and Singapore.
 Expansionary Monetary Policy (deals with the banks)
 Expansionary Fiscal Policy (deals with the Government)
With the Expansionary Monetary Policy, Central Banks may reduce interest rate by reducing
the overnight loan rate. When interest rates go down than firms can barrow at a lower rate,
giving firms the chance to invest in machines, land, ects., and also allowing firms to pay less
interest on debt, giving the firm the chance to grow. (Chapter 31: Monetary Policy, 2009)
With Expansionary Fiscal Policy there are two methods through increase government
spending and tax cuts that can help. By increase government spending, government may
increase spending and target these funds towards certain firms. Such increases may be in the
form of giving out a loan, such as a bailout, like what we saw here in the United States, or giving
out a big contract to the firm. An example would be if the Governments of Hong Kong and
Singapore wanted to encourage growth in the financial sector, they may give some government
funds for these firms to invest. If firms have more business, they will hire more workers, thus
promoting growth. (Chapter 29: Fiscal Policy, 2009) For similar reasons as increase government
spending, the government may reduce corporate tax rates. By doing this, firms will have more
profit, allowing for the hiring of more workers and more investments, equaling to growth of the
firm. (Chapter 29: Fiscal Policy, 2009)

4. CONCLUSION
Because these methods are used around the world and have worked for many firms, and
governments, Hong Kong and Singapore firms would benefit from these polices.

5. REFERENCE
(2009). Chapter 29: Fiscal Policy. In P. &. Krugman, Economics (pp. 767-796). New York: Worth.
(2009). Chapter 31: Monetary Policy. In P. &. Krugman, Economics (pp. 831-858). New York: Worth.
(2009). Chapter 33: Macroeconomics: Events and Ideas. In P. &. Krugman, Economics (pp. 885-907). New
York: Worth.