The paper 'Government and the Economy' is a great example of a Macro and Microeconomics Case Study. In any economy, the government plays a crucial role concerning the consensus in the economic literature, should it fail in performing the following functions, many negative consequences may be encountered. The government should ensure private property rights, provide enforcement of contracts, act as a referee, and impose penalties for externalities. It should also facilitate the economy with regulation, legislation, and ways of quality determination and moreover define rights of ownership. Such a move not only positively impacts the current investors but also on the potential investors.
Nevertheless, government involvement may help protect consumers for high prices or sub-standard goods. The government should make anti-monopoly laws that fight monopoly power and non-competitive behavior In order to encourage competition which is a motivator to producers and resource suppliers to respond to price changes and consumer requirements. Although monopoly may be due to the high risk involved or the high starting capital, basic needs should not be left in the hands of monopoly power. Nevertheless, it is worth noting that although it is important to enhance competition, there is also the need to protect the domestic industries from unfair competition.
An example is dumping where foreign companies or countries enjoying favorable factors of production dump sub-standard goods to countries with inferior economies. It is important to note that foreign countries exports a big proportion of the profit earned to their mother countries. It is for this reason that the government needs to weigh the impact of implementing its policies regarding monopoly competition and the domestic industries. The government should tax those with larger income and provide relief to the needy, dependent, handicapped, and unemployed; this is achieved through welfare, social programs, and social security.
In addition to that, support initiatives like low-interest loans to students based on their family income. Such a move helps raise the per capita income thus increasing the purchasing power of the consumers. That notwithstanding, income redistribution avails more capital to both the current and potential investors, such income may be used to expand the business ventures.
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Nicke, C. 2007. Objectives of Monetary Policy.
Schneider, R. R. 1995. Government and the Economy on the Amazon Frontier (Vol. 11). World Bank Publications.
Wade, R. 1990. Governing the market: Economic theory and the role of government in East Asian industrialization. Princeton University Press.