Tài liệu Government in the mixed economy

What do governments do?
create laws, rules and regulations
buy and sell goods and services
make transfer payments
impose taxes
try to stabilize the economy
affect the allocation of resources

What shouldgovernments do?
Governments may be justified in intervening in the economy in the presence of market failure
Six ways in which intervention may improve the allocation of resources:
(1) The business cycle
–decisions on taxation and spending may affect the business cycle
–not always favourably
(2)Public goods
–goods that, even if consumed by one person, are still available for consumption by others –e.g. clean air
–the free-riderproblem prevents the market from achieving production of the “right” amount of such goods.