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Macroeconomic – Government Intervention

In any socio-economic system, the state plays an important economic role, doing more or less a set of social and economic functions.

The market in its nature is imperfect and is not intended to solve social problems, which in turn causes the need for government intervention in the economy.

Market imperfections can be seen in the following:

  • Market is not able to resist the monopolization of the economy, which limits the freedom of market competition. Monopolists dictate prices to get monopoly super profits, making it necessary for the state to regulate prices for transport services, energy, and raw materials.
  • Market is not interested in the production of public goods, which feature is in the fact that they should be used by everybody, who are not obliged to pay for them. Public goods are not competitive goods and services available to everyone. They include, for example, traffic management by means of signs, services in education, health, science, culture, and many other areas. Despite the fact that they are free of charge for the consumer, they are not free to the public and are related to the costs, which market is not able to bear.
  • Market does not provide social security, cannot neutralize the differentiation in the distribution of income, and does not provide a stable employment of the working population. All this leads to social stratification, increasing social tensions.
  • Market does not eliminate the adverse effects arising from the increase in production and the increase of social wealth.
  • There are incomplete markets, such as pension or health insurance market, which require government regulation and support.

All these manifestations of market imperfections indicate a need for government regulation and implementation of economic functions.

State regulation of the economy is the process of influence of the state on the economic life of society and the related social processes, during which the economic and social policy of the state is being fulfilled.

The areas of the macroeconomic state regulation have expanded significantly during the global economic crisis of 1929-1933 and World War II. The increasing role of the state was seen in the enlargement in total public spending and redistribution of the gross domestic product of society through the state budget.

In modern conditions the role of the state is further increased as the market mechanism is not able to cope with all the tasks of rational distribution of resources and income. The state should complement the work of the market mechanism, while retaining all the positive aspects of its impact on society.

In any socio-economic system, the state plays an important economic role, doing more or less a set of social and economic functions.

The market in its nature is imperfect and is not intended to solve social problems, which in turn causes the need for government intervention in the economy.

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Assignment ID
100001752
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CREATED ON
September 24, 2016
COMPLETED ON
September 25, 2016
Price
$36
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Essay Example Comments
Janeee
June 19, 2015
Janeee
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ned94
June 19, 2015
ned94
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June 19, 2015
R00fer
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