1.What do you think about the role of government in a market economy? Do you think government should intervene in a market economic system? Why? Explain.
The government plays a critical role in a market economy, for it establishes the strategies of providing key services, redistribution, regulation and subdivision. Concerning provision, the government plays the role of providing public goods and services such as national security, which is imperative for a stable economy. Within the American economy for example, the Lorenz curve provided information towards the existence of unequal distribution of income. By carrying out redistribution therefore, the government will be making distribution of income and other important resources less unequal (Gregory et al, 2004). By carrying out regulation within a market economy, the government will be setting grounds for a free and fair market, which is the foundation upon which a stable economy operates. Over and above, I harbor the perception that the government should intervene in a market economic system, for such a strategy guarantees that, the ideal monetary and fiscal policies are in place to prevent the market from fluctuations.
2.What are the proprietorship business organizations and corporations? Which one do you think is more important for the American economy? As a macro economic policy maker, would you support the growth in the number of proprietorship businesses or corporations? Why?
A proprietorship entity refers to
In this chapter, Wheelan shares two lessons about the role of government in the economy. These are: First, he states that "the government must not be the sole provider of a good or service unless there is a compelling reason to believe that the private sector will fail in that role." He expounds further that the government will be freer to take care of things that need to be really handled by the government. There are things that the government should not be doing because when it dips its hands on that, it will presumably be inefficient. He cites the example of postal mail. He posits that the technology today has radically changed and things need to be implemented differently. The second point is that even if the government has an important role to play in the economy, it need not be the actual one to do the work (p 66).
Should minimum wage be increased? In my opinion, it should not be raised. But why not? If the minimum wage increases, the cons will be more effective than the pros. For a start, everyone with the higher paying jobs will want more money. Leading more money to be made and the price of goods will rise. Say right now, the minimum wage is 8.05 and if they rise it to 10$, everyone else that was getting paid 10$ an hour will want an increase as well. And it will keep going on until every job gets a raise. Also it wouldn’t be fair for the people who worked hard and some even go to college and would get paid only 10$ an hour for a start as too someone who got there first job and with no experience
For economists and politicians alike, efficiency and equity pose an insoluble trade-off that any administration must determine their stance on. On one hand, classical and neoclassical economists denounce government intervention in the economy by claiming that market achieves its epitome of efficiency when business is responsible for the allocation of scarce resources in their pursuit of profit; on the other hand, Keynesian economists can’t stress enough the role of government in resolving market failures and promoting equity among members of the
What are the main reasons why government should take only a limited role in a market economy?
Government plays a crucial role in the market economy by ensuring the laws and regulation are abide by, and control the production of the private sectors, although, over the years its efforts in controlling such economies are minimal and insignificant. Market forces of demand and supply play a major role in setting trends that such market economies follow. Economic growth, inflation, interest rates, wage rates of workers and unemployment rates are some of the fields the government takes part in controlling, to boost the Gross National Product (GNP) of the state.
The government does not necessarily need to intervene how the marker goes. Therefore, the competition is a significant factor of the free marker economy.Active but limited government is another main part of the free market economy. This means that the government undertakes a significant, active role in the market, but at the same time the government’s role is ver limited because all the investments and decisions in the economy are controlled by the market than by the government. An invisible hand will control the market. Limited government is a type of government in which there is a minimum intervention in personal properties. Overall, the government tries to keep the economy in a law and let it free by limiting itself. Hence, the limited government is an essential factor of the free market economy.Last, self-interest is a significant part of the free market economy. Self-interest refers to one’s desire to buy something. The market will be generally controlled by people’s interest; the companies will compete with one another to fit the best taste. This is because the people’s interest will be the main trend in the market and it will control what should be made in the market. Consequently, the market will be self-regulated according to the theory of a free market. Therefore, the self-interest is another significant factor of the free market economy.Therefore, the competition, the
Free markets are considered inequitable because of the lack of equality; if the government were to intervene they would promote equity. The Brazilian government could stabilise the economy and lower inflation and promote economic growth (Coglan, 2013, pg312).
In this essay I will be talking about how I feel about the government having a bigger role in the U.S economy. Why should the government have a bigger role in the U.S economy? Like I said this is about my opinion should the government have a bigger role in the U.S economy, in the next paragraph I will tell you my opinion about this statement. I’m going to be giving my opinion about this whole government having a bigger role in the U.S economy. I mean most people would say no for a great reason, but some people say yes for a great reason too.
Governments may intervene in the market system to fix prices above or below equilibrium if they believe that it is in the public interest to do so. Governments may intervene in the provision, regulation, maintenance and management of public goods to maximise the benefits to the
Free markets have often been idealized in the US, and have become a dominant tool for trade and distribution of goods and services. There have been multiple waves of government regulation and deregulation of the market in US history. Each of these trends have been grappling with the central question of how sufficient markets are at satisfying our goals. In theory, free markets are fair and efficient at distributing goods and services. In reality, however, government must intervene in the marketplace for two overarching reasons. First, because in practice free markets left to themselves are not always fair and efficient. And second, because fairness and efficiency are not our only goals and
The system of capitalism and also called a laissez-faire system. The system operates on the principle of free market, where the role of the government is very limited. The main tasks of the government, as provided by Adam Smith, are maintaining law and order in the country, arranging money supply and strengthening national defense. The market system has different economic functions. However, government functions have increased over the long term (smith, A., 1779). The government is important in the economy as follows:
The appropriate role of government in the economy consists of six major functions of interventions in the markets economy. Governments provide the legal and social framework, maintain competition, provide public goods and services, national defense, income and social welfare, correct for externalities, and stabilize the economy. The government also provides polices that help support the functioning of markets and policies to correct situations when the market fails. As well as, guiding the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability. By applying the fiscal policy which adjusts spending and tax rates or monetary policy which manage the money supply and control the
He concludes on this thought stating, “What the market does is to reduce greatly the range of issues that must be decided through political means, and thereby minimize the extent to which government need participate directly in the game.” Friedman more narrowly believed the government should intervene with “indivisible matters.”
I think that if free markets just regulated themselves and the governement couldn't do anything then things could get out of control. The government should have some restriction on what a state can or cannot.Keynesian Economics describes Inflexible Prices: Mostly we see that while a wage hike is easier to take, wage falls hit some resistance. Likewise, while for a producer, commodity prices are easily upwardly mobile, he is extremely reluctant for any reductions. They believe that household savings and investments are based on disposable incomes and the desire to save for the future and commercial capital investments are solely based on the expected profitability of the endeavor (http://www.buzzle.com/articles/classical-economics-vs-keynesian-economics.html). Spending on national defense, a core constitutional function of government, has declined significantly over time, despite wars in Iraq and Afghanistan. Spending on the three major entitlements'Social Security, Medicare, and Medicaid'has more than tripled. While Medicaid and Medicare sound similar, they are in fact very different programs.
Authoritarianism can coexist with liberal markets, and is in fact the best way to ensure the well being of the people of a country. In Iran, state driven economics have had a negative effect on our national economy, and a transition to a more market based economy is essential. This is evident from both culturalist and structuralist viewpoints.