Question

What role does the government play under a market economy

Answer 1

1. Efficiency: The government should attempt to correct market failures like monopoly and excessive pollution to ensure efficient functioning of the economic system.
2. Infrastructure: The government should provide an integrated infrastructure that enhance, directly or indirectly, output levels or efficiency in production.
3. Equity: promote equity use taxes and spending to redistribute income toward particular groups.
4. Economic Growth or Stability: rely upon taxes, expenditures and monetary regulation to foster macroeconomic growth and stability to reduce unemployment and inflation while encouraging economic growth.