Government Role

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Date Submitted: 03/11/2011 05:49 AM

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The Influence of Government and its Role in Economy’s Regulation




Unsurprisingly, but the role of government in economic activity is essential and influential. In fact, the government provides the systematical capitalistic platform where consumers purchase and own the private property as well as participate in the free and competitive marketplace. Also government regulates and operates the laws that can impact on the establishment and development of economic relations inside and outside the country. Everything that concern economic operations is followed by government: taxation system, inflation process, interest rate and so on. In other words, the government plays a substantial role in the public’s ability to live in normal lifestyle and use all the advantages of adequate business.

In practice, there are four ways when the government affects the economy inside the country:

1) less than half of federal spending is directed on manufacturing and production of the goods, services, roads and support of the national defense;

2) “the government transfers income through both the tax system and outlays; popular perception typically focuses on transfers across income classes through the progressive income tax system and means-tested benefits, referred to as vertical redistribution, but this vertical redistribution is dwarfed by horizontal redistribution, transfers unrelated to income class; the largest beneficiaries of transfers are the elderly, through programs such as Social Security” (Labonte, 2010, p.1);

3) the government gains the taxes and that changes economic behavior: labor taxes, for instance, alter the incentives to work; taxes on specific goods alter the incentive to produce and consume this type of goods;

4) The government regulates economic for environmental and consumer protection as well as for workplace safety.

The allocation of resources is the main task of...