Terms in this set (6)

What are the six functions of the government?

Terms in this set (6)

• To form a more perfect Union. To get the states to agree and work together.
• Establish Justice.
• Insure domestic Tranquility.
• Provide for the common defense.
• Promote the general welfare.
• And secure the Blessings of Liberty to ourselves and our Posterity.

What are the economic role of the state?

It controls over production, distribution, consumption of commodities and to perform this the government has to devise physical controls and monetary and fiscal measures and these measures are essential for reducing economic and social inequalities that are prevailing in under-developed countries.

What are the major advantages and disadvantages of government intervention in the economy?

There are benefits and drawbacks to command economy structures. Command economy advantages include low levels of inequality and unemployment, and the common good replacing profit as the primary incentive of production. Command economy disadvantages include lack of competition and lack of efficiency.

What role should the state play in the economy?

Economists, however, identify six major functions of governments in market economies. Governments provide the legal and social framework, maintain competition, provide public goods and services, redistribute income, correct for externalities, and stabilize the economy.

How does government intervention improve efficiency in an economy?

Government intervention can increase economic efficiency when market failures or externalities exist. Economics cannot quantitatively value social goals, although it can often offer suggestions for how to achieve those goals in the least costly way.

How does the government intervene in the economy?

The government tries to combat market inequities through regulation, taxation, and subsidies. Examples of this include breaking up monopolies and regulating negative externalities like pollution. Governments may sometimes intervene in markets to promote other goals, such as national unity and advancement.

Why government intervention is good for the economy?

Without government intervention, firms can exploit monopoly power to pay low wages to workers and charge high prices to consumers. Government intervention can regulate monopolies and promote competition. Therefore government intervention can promote greater equality of income, which is perceived as fairer.

Why government intervention is bad for the economy?

For example, government tariffs to protect domestic industry spark off a trade war, where the economy contracts. Lack of incentives. In the free market, individuals have a profit incentive to innovate and cut costs, but in the public sector, this incentive is not there. Therefore, it can lead to inefficient production