Final answer:
Government policy can boost U.S. economic growth through investment in human capital, infrastructure, tax reductions, creating special economic zones, and funding research. A tax cut could lead to higher aggregate demand, increasing output and employment. Increased demand for U.S. exports from higher EU growth can also contribute positively to GDP and reduce the trade deficit.
Step-by-step explanation:
Economic growth in the U.S. can be stimulated by various government policies aimed at enhancing the country’s productivity and increasing output. Some areas where government policy can help foster growth include investing in human capital through education, building infrastructure for transportation and commerce, lowering taxes to increase investment, creating special economic zones with reduced tariffs, and funding research and development.
An example illustrating the impact of government policies might involve a tax cut for businesses, leading to higher aggregate demand. This would likely result in a new economic equilibrium characterized by increased output, higher price levels, and potentially more employment. Another area impacting economic growth would be the surge in demand for exports due to higher EU growth, which would likely lead to an increase in U.S. GDP, employment, and a reduction in the trade deficit. In contrast, raising excise taxes on computer production machinery could hamper growth by increasing the costs for businesses, thus possibly reducing investment and slowing innovation.