Government expenditure and taxation; high levels of spending from the government increase the rate of tax and borrowing. This discourages investments because investors will no longer be interested in borrowing loans that attract high interest. Also, high expenditure reduces the amount of savings limiting private investments, which in turn declines the levels of production and eventually loss of employment.

They are establishing the rates of interest. Currently, the government has influenced interest rates to encourage borrowing. Lower rates encourage potential investors to borrow hence increasing productivity. Higher rates discourage investors and reduce the rate of consumer expenditure. Moreover, when the economy salvages, the government boosts it by printing money to increase inflation.

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