As a society, our standard of living depends on our ability to produce goods and services (Mankiw, 2012). The ability to produce these goods and services depends on several factors including physical capital, human capital, natural resources and technology (Mankiw, 2012). Government plays an important role in the growth rate of an economy. They gain their influence on the growth rate through the implementation of various government policies. These policies not only influence the growth rate of the economy, but also play a significant role in daily life. Government policies on savings and investment play an important role in influencing both the rate of economic growth and daily life. A country's savings and investment rates are closely linked to that country's economic growth rate (Kotlikoff, 2008). This is also related to population growth in an economy. The younger the workforce, the more they will save for retirement, rather than spending their retirement (Kotlikoff, 2008). This leads to a positive savings rate. In a country with a growing economy, the saving rate will be positive to ensure sufficient capital for its workers (Kotlikoff, 2008). The more we save, the more we have to spend on capital to improve productivity. In the United States, all levels of government account for nearly one-fifth of American consumption (Kotlikoff, 2008). This allows the government to play a leading role in economic growth. Government fiscal policies have a profound effect on saving. If the government taxes capital relative to labor, this leads to a decline in saving (Kotlikoff, 2008). Government policies on hiring the younger workforce and distributing to the elderly of the society also... middle of paper... Government plays an important role in a nation's economy. Their decisions about which policies to pursue and which to leave on the table affect both their citizens and their economy. Because a nation's government is one of the largest groups of people united in a country, its policies can have a profound influence. Works CitedEducation-Portal.com. (2010, 01 26). Retrieved August 14, 2011, from New Study Links Education to Economic Growth: http://education-portal.com/articles/New_Study_Links_Education_to_Economic_Growth.htmKotlikoff., LJ "Saving." The concise encyclopedia of economics. 2008. Library of Economy and Freedom. Retrieved August 14, 2011, from the World Wide Web: http://www.econlib.org/library/Enc/Saving.htmlMankiw, G. (2012). Principles of Macroeconomics (6th edition ed.). Mason, OH: Southwest Cengage Learning.