Of The Government Effect On The Economy

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Table of Contents

Introduction
Ways the government can affect the economy
Conclusion
Works Cited

Introduction

It is fundamental for every government to work towards achieving a growing and stable economy. A government therefore should guide the general trend of its economic activities to ensure that there is a flow in revenue, price stability, and enough employment opportunities. The government often plays a major role in affecting the financial systems of a given country. In light of this, this research paper shall explore the various ways in which the government can affect the economy.in addition, the different activities that provide the most impact on the economy shall also be examined.

Ways the government can affect the economy

Currently, globalization has greatly affected the world’s economy leading to the financial crisis in most countries. Apart from the effects of globalization, the government can also influence the economy of a given country. There are several ways in which a government can affect the economy (O’Sullivan and Sheffrin 14). One way is when the government outlines several activities to help to develop the lives of its citizens. Therefore, the government can control the distribution of resources to ensure that social groups are favored. The government can also provide goods to its public in case of a poor market. Corruption is a major threat to the government as it causes distribution problems in the economy (Besley 48). The government should not entertain any element of corruption as it interferes with resource allocation. Corruption can affect the public infrastructure and investment and this may reflect on the citizens. To avoid such misallocations, the government can ensure that products are of good quality. This is in addition to providing a medium of exchange and imposing on contracts. The government often plays a major role in influencing finance in a system by controlling the circulation of currency. As a result, the government can also control decisions concerning inflation, taxes, and interest rates. Paying taxes is crucial to enable the government to meet its financial obligations. Imposing taxes by a government can determine the average savings and revenue in an economy (O’Sullivan 22).

Essentially, the government provides legal frameworks that are required to ensure that the economy operates efficiently. The purpose of the legal framework is to set the legal position of enterprises and guarantee the rights of private possession (Besley 78). The government can affect the operations of the market by controlling competition. In a market setup, a lack of a regulatory system can affect consumers and producers. The market is very essential for the government as it can distribute income to an economy. A government can decide to control a monopolistic market to avoid consumer exploitation by unscrupulous business operators (O’Sullivan and Sheffrin 35).

Conclusion

The government can greatly influence the economy of any given country. This is concerning such issues as the determination of investments, revenue collection, resource allocation, and the establishment of legal structures in an economy. The growth and stability of an economy can be determined by how a government regulates or control its resources. Politicians often play a major role in influencing the economy of a country. They can either mislead an economy or work towards developing the available resources. As part of the government, politicians should desist from illegal practices like corruption that pull down an economy. The government should always strive to improve public infrastructure and ensure that there is equal distribution of resources.

Works Cited

Besley, Timothy. Principled Agents? The political economy of good government. Feb.2006. Web.

O’Sullivan, Arthur & Sheffrin, Steven. Economics Principles in Action. 2006. Web.

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Of The Government Effect On The Economy

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