Question

Where do you think we would be without governmental involvement in the economy as regards our standard of living?

Answer 1

SOLUTION

ECONOMY WITHOUT GOVERNMENT INVOLVEMENT

THE ECONOMIC ROLE OF THE GOVERNMENT, " FOCUS ON THE STABILITY, NOT SPENDING "

Without government intervention firms can exploit monopoly to pay low wages to workers and charge high prices for consumers . Without government intervention the firms are liable to see the growth of monopoly power. Government intervention can regulate monopolies and control competition. In order to regulate monopolies there is a need of government intervention.

THE NEED FOR GOVERNMENT INVOLVEMENT OR INTEVENTION

The government must focus on maintaining economic stability. Fiscal responsibility is an important part of the stability.Government debt can quickly become a burden on the economy and weaken its foundations. Sound macroeconomic policies can enhance the credibility of the government and strengthen the political institutions. IN order to restore the economic stability, policy makers must focus on restoring the institutional role of governing. Government can provide a stable environment for economic growth when it can be depended to maintain the stability of the currency enforce and defend property rights and provides oversight that assures private citizens that their transaction partners in the market place are held accountable. This will allow the market participants to begin putting their resources back to work in the areas where they are most beneficial.

After decades of lecturing developing countries on how to emerge from economic crisis and stimulate economic growth through sound government policies, some economists are throwing out all their advice during the first major crisis test. This is particularly true when it comes to advice on accumulating more and more debt.

Government spending and government deficits automatically increase during the economic downturns due to more demands on social - safety - net provisions and falling tax revenues