The Functions of Government in our Economy

Regulate Business

Government regulation has four main purposes: Preventing abuses-prevents business from taking

unfair advantage of workers (discrimination, etc.) Protecting consumers-FDA, FCC, SEC Limiting negative externalities-limit the negative

effect of the economy on citizens (pollution, traffic congestion, soil erosion, etc.)

Promoting competition-creating and enforcing of the anti-trust laws (no monopolies)

Provide Public Goods

a special type of goods or services that the government tries to supply to its citizens streetlights, national defense, court systems,

correctional institutions, law enforcement merit goods-a good that is considered

“socially acceptable” museums→Smithsonian Institute

demerit goods-a good that is considered “socially unacceptable” alcohol, tobacco, firearms→strict taxation and/or

regulation

Redistribute Income

using taxes to assist citizens in need Social Insurance Programs-MUST

PAY TO RECEIVE Citizen’s paychecks Pay benefits to retired and/or disabled

workers social security worker’s compensation

Redistribute Income

Public Assistance Programs-RECEIVE REGARDLESS OF WHETHER TAXES HAVE BEEN PAID INTO PROGRAM welfare-payments to citizen’s based on need W.I.C.-women, infants, & children

$ to single mothers; low income C.H.I.P.-Children’s Health Insurance Program Medicaid-free healthcare for low income persons

Ensure Economic Stability

keep the unemployment rate low keep the inflation rate low

a rise in the general price level of goods and services