Question

In your own words, explain how public policy and private sector initiatives influence the economic climate.

Answer 1

Answer

Public policy is planned and implemented by the government and its affiliated institutions to promote public welfare and economic growth, while private sector initiatives are done by the private firms as a part of normal business activities and CSR initiatives.

Here, government has a clear idea that government alone cannot build a suitable economic climate and develop the economy, then it uses public policy not only for the welfare of the people, but also to encourage the private firms to bring investments, create jobs and conduct production activities. It builds a positive economic climate and people have a good expectations of the economic development. Further, public policy helps people with health care programs,

unemployment insurance and other social security benefits, working as autonomous stabilizers so that it maintains the aggregate demand in the economy and firms get the AD to create supply in the economy. It works as a balancing act and economy keeps growing. In recessionary scenarios, government comes with the discretionary policies, that stimulates the economy with focus on households and firms as well. It brings economy back to normalcy an firms keep their initiatives to create jobs and produce again. It maintains the positive economic climate for investors, households and other participants of the economy.