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Now, you should have a good idea of
the characteristics, benefits, and problems of the two main
types of economic systems and understand how, and why,
countries seem to be moving toward a market, or more
laissez-faire, system. Here we will examine the economic
functions of government in a market economy.
Most economists, and politicians,
agree on these general principles, BUT they may disagree
strongly on the degree of involvement the government should
have in the economy. I think, most people agree on WHAT the
government should do, but they disagree on HOW
MUCH.
We learned in lesson 2a that market
economies are efficient and that centrally (government)
planned command economies are inefficient. So whenever there
is government involvement in a market economy we should ask
WHY? If market economies are efficient and efficiency
reduces scarcity, why would the government get involved? We
will learn that sometimes the government is needed to ASSIST
a market economy to be efficient and sometimes a market
economy is inefficient and the government is needed to FIX
it.
After looking at the economic
functions of government we will look at government finance
in the United States. Latter in this course we will discuss
how the goverment uses spending and taxation to affect the
economy. Here we learn what the government spends its money
on and where governments get their revenue
(taxes).
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