Recently, Canada established an Advisory Council and they came up with an idea of creating a Canadian Infrastructure Development Bank to build highways, bridges and city infrastructures in order to stimulate economic growth. From my point of view, this plan takes time to fully apply but it is going to boost economy both in short-run as well as long-run. And the growth will gradually slow down in the long-run.
First of all, those projects would create more job positions for certain which means the unemployment rate would go down. People who don't have work before could purchase more goods than only rely on the unemployment compensation. Increased consumption lifts GDP (gross domestic product). As a matter of fact, there is a tight relationship between economic growth and reductions in unemployment rate, called “Okun’s law”. [1] Output depends on the amount of labor used in the production process, so there is a positive relationship between output and employment. Total employment equals the labor force minus the unemployed, so there is a negative relationship between output and in employment. The amount of growth would also rely on the marginal propensity to consume. As if people are more likely to spend more of their income, the short-run growth would be enhanced more dramatically.
Spending on materials spurs
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Taking Beijing as an example, it has the greatest public transportation system, schools and hospitals in China. People value those things, they want to live in an environment with modern and convenient facilities. Therefore, they come to Beijing buy apartments and send their children to famous schools. Their next generation will have better education level so that they could generate more knowledge to society. This so called human capital which is crucial for improving output and economic growth in the long