Role Of Government In Economics
Role of Government
The government provides the legal framework and the services needed for a market economy to operate effectively. The legal framework sets the legal status of business enterprises, ensures the rights of private ownership, and allows the making and enforcement of contracts. Government also establishes the legal "rules of the game" that control relationships among business, resource suppliers, and consumers. Discrete units of government referee economic relationships, seek out foul play, and impose penalties.
Government intervention is presumed to improve the allocation of resources. By supplying a medium of exchange, ensuring product quality, defining ownership rights, and enforcing contracts, the government increases the volume and safety of exchange. This widens the market and fosters greater specialization in the use of property and human resources. Such specialization promotes a more efficient allocation of resources.
The government improves the operation......
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