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Economic Functions of Government

Economic Functions of Government. Unit #9. 6 Economic functions of government. Maintain legal and social framework Maintain competition Provide Public Goods and Services Correct for Externalities Stabilize the Economy Redistribute Income. Maintain legal and social framework.

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Economic Functions of Government

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  1. Economic Functions of Government Unit #9

  2. 6 Economic functions of government • Maintain legal and social framework • Maintain competition • Provide Public Goods and Services • Correct for Externalities • Stabilize the Economy • Redistribute Income

  3. Maintain legal and social framework • Define and enforce property rights (court system etc.) • Establish a monetary system (Federal government controls the amount of money in circulation, regulates banks etc.)

  4. Maintain competition • Create and enforce antitrust laws (government regulates prices of natural gas to homes, etc.)

  5. Provide public goods and services • Public goods and services are those that markets will not provide in sufficient quantities (national defense, post offices, schools)

  6. Correct for externalities • Reduce negative externalities (pollution in lakes and rivers by industrial waste) • Encourage increased production of goods and services that have positive externalities (public education, government subsidizes it because of the flow to society)

  7. Stabilize the economy • Reduce unemployment and inflation and promote economic growth! (raising or lowering taxes etc.)

  8. Redistribute income • Redistribute income from people who have higher incomes to those with lower incomes. (higher taxes for those with higher incomes helps pay for Welfare etc. )

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