Grade 10B
Discuss how government can play an effective role
in the management of economic activities
in a particular economy.
in the management of economic activities
in a particular economy.
Time Duration for submitting the Article is
August 25th to September 1st, 2013
Write your answer here in 500 Words.
For rubrics please check in
'Food for thought column on my bog under title Rubrics'
ReplyDeleteThere are many ways in which the government of an economy could perform well in playing their role to manage their economy. It is one of their main objectives to ensure that the economy is running in accordance and that the environment and people are not exploited. Maintaining an effective role at managing the economic activities is, thereby, vital to achieve this objective.
Governments have their tools and policies, which they use to affect and manage economic activities. Tax, is one of the most common tools used by the governments. It is also used in fiscal policies to affect the demand- and consumption levels in the economy. Tax can also affect business and influence their activities. If, for example, the level of competition in the economy is falling and there’s an increasing risk of monopoly, the governments can use tax to encourage new enterprise. Government may allow tax reduction for new businesses or even omit income tax to new entrepreneurs and thereby, providing more opportunities for these entrepreneurs. Also, if a business or and industry is known to exploit resources in the economy, damaging the environment and the livelihood of the people, taxes can be used to help stop this. High tax of fine may be imposed on these businesses to discourage them from harming the environment and the local communities. However, taxes may not always be suitable to manage the economic activities. For example, in a condition where the economy growing but lacking competition. The government would need a lot of fundings to support the economic growth and increase its investments. Increasing tax would further reduce competitions in the economy and may even hinder economic growth as people try to save more as their disposable incomes fall. Lowering tax would increase competition and encourage new enterprises, but it may reduce government’s scarce funds.
Laws and regulations may also be used by the governments to manage economic activities. Governments usually uses these laws and regulations to prevent inappropriate actions or exploitation of resources by big private companies. If any company or organization trespasses against these laws, they are subject to the court and may be fined. Laws can also be used to break huge companies into smaller ones in order to avoid monopolies and increase competition in the economy. Sometimes the government may also erase laws and regulations, which is called deregulation, that they think are not necessary or hinder economic improvements to encourage more a more active economy or attract multinationals into the economy. On the other hand, laws and regulations tend to limit economic activities in the economy, which may hinder or slow down the economic growth and development. Using laws and regulations to affect a certain sector of the economy may also affect other sections in which the government did not wish to affect, and may result in ineffective management. For example, the government may increase its minimum wage laws to protect its people and raise their living standards as well as increasing economic development. However, it may also discourage multinationals to enter the economy and discourage new enterprises as the costs of labour increases. It may also increase unemployment as firms tries to reduce costs. As a result, economic development, which is the main objective of the new law, is slowed down or even declines.
To conclude, the government in a particular economy can use their tools and policies, such as taxes and laws, to manage the economic activities in their economies effectively. Government may use different tools and policies according to their situations such as reducing taxes for new enterprises to increase competition.
Some economy system have different sector that can do their role, government only have a role in mixed economy system and also planned economy system. Government mostly takes action in planned economy system because organization and firms mostly owned and controlled by government. In mixed economy system ownership of scarce resources and decision how to use it is split between private sector and public sector. Some countries private sector is large and control some resources so there will be less government role and some country have bigger public sector which controls a significant resource so less private sector role there.
ReplyDeleteGovernment can play an effective role in management of economic activities by encourage the people who live at that country. Government can create a law which make the people must pay tax to government so government can encourage people there. With tax as an income for government, government can give free school fee to give education to people there so they can work well and mostly in tertiary sector which pay in high wages. High wages will lead to government aims to have low rate of unemployment, high wages make the employees are able to satisfy their need and wants.
With tax Government can help the economy to face scarce of resources, government can subsidy so the price will be less and the demand still high so it will be benefit for costumer and also to the firms who made the product.
Government can also build infrastructure to make an easy access for costumer and also for company to export goods. Make a public transportation will help to reduce pollution and also save environment.
On the other hand, this need time to create that and need high budget. Private sector will be fewer roles on that country and less investment from other country. Mostly the country are most likely to use their own product, less import will make less relationship between countries to other countries.
Most resources that the country has will be used to create goods and service so it will reduce number of resources. Lack of resources will increase number of import, this situation will increase competitor and make the price become higher because the resources quite expensive, even with government subsidy the competition between company to other companies will be high and make less demand on the local company.
The rise of living standard will reduce the number of death rate this will make an overpopulation. Overpopulation has some problems which make less land space resources and increase in demand.
In conclusion, government can play an effective role to develop the country with encourage people there. Subsidy, free school fee, and infrastructure will help to increase the standard of living in that country. Even though there are disadvantages which can create a problem like overpopulation, lack of resources and competition that will increase number of import. Government can control it by have a stable production and make a quota to limit the imported goods and control population by contraception.
Government plays an important role in the market. They shift the aim of profit from organization onto taking care the well-being of their people. Government create law and regulation to control market activities done by businesses in the economy. Business activity don’t always go in the correct path and market failure often happens and businesses are taking more and more profit from its customer. They are unable to make someone’s life better without making other worse as well as bad allocation of scarce resources.
ReplyDeleteGovernment influences market activity by setting up rules and regulation that people must follow. As well as applying certain policies at certain times to help the economy. Government can bring ups and downs. They are effective at some point and ineffective at certain point. Sometimes government management can result in problem such as worsening the market failure and kicking business out of business due to their policies. Government will somehow increase taxes when there is problem and this may disrupt economic activity and people would not goods because it is expensive due to high tax. During recession central bank and government will raise interest rate and influence consumer consumption and loan. People would save more because it is beneficial for them and corporation or individual will borrow less.
On the other hand, government can be effective, especially when correcting market failure using trade barrier such as tariffs and embargo. By completely banning those goods and making it expensive will halt that economic activity. With all the power government has, it will influence the market badly especially with its law and regulation. Certain regulation made can completely discourage market activity to run.
In conclusion, government role is not always effective in managing the whole economy. Sometime their aim and system are good but their application is not that effective compared to all the theories being written by the government and sometime they failed to foresee all the disadvantage in the future. On the other hand, without government role the management could be even worse and consumer are being monopolize heavily by firms for profit and market failure can occur where all the scarce resources are allocated mistakenly by firms and are misused by the customer of course due to their lack of knowledge they fall to the hands of the bad firms. With government, at least government are able to warn the consumer and stop the firms. Ferdin
In some countries government are unable to control or manage their own economic activities. when they are unable to control or manage their economic activities it will brings market failure. market failure is when the government are unable to manage the market so that the quantity demanded by consumers does not equal to the quantity supplied by suppliers. government can do their role to manage optimally is when the government are planned economy, while in mixed economy government able to manage market but not as optimal as planned economy; in the other hand, when government are using free market system the government are powerless when they need to manage their market.
ReplyDeleteAs mixed economy playing the role to manage the country so that the country wont experience market failure need some extra work, for of the market that is determined not by the government but also by the market it self. Government can successfully play their role to manage the economic activities by doing many things such as increasing tax of certain goods(merit goods) to increase government revenue but also decreasing the usage of the merit goods. other than merit goods government also can imply tax so that the natural resources might not wasted. however government can do others thing like increasing the infrastructure but also they can subsidize some firms so that the firms can optimally use the raw material so that the pollution can be controlled. in mixed government also can influence the market by banning some goods. government also can influence import and export of goods. In the other hand, when government are using free market system it means government has minimum access to control the market. in free economic there are less banned goods and others free things. so because of that government usually use tax to control/manage the economic activities.
There are some attribute which can be use by the government so that the can play an effective role in the management of economic activities.
Tax is use by some government so that they can control the price by giving or increasing the tax so that it will make higher price so that the usage of the material is more efficient. some times government can imply tax to some merit goods so that the usage of merit goods is less, example alcoholic drink, drugs, etc. government also might gives education "free education" so that the labors that available are more competent on technology. Also government can subsidize company so that the company can do more production process so that demand will meets the supply. also government might increase investment by giving low tax so that the demand can meet supply.
however, there is some opportunity cost that will be sacrificed. using tax to make the selling low might make inflation and also if the goods which implied by tax is basic need goods it will make people cant afford to buy it and living standard decrease. while, banning or giving tax to some drugs might cause people who needs those drugs for medication (example :marijuhana) wont be able to buy those goods.
In conclusion, there are some policies government might use to manage the economic activities so that market failure wont occur. however there are sideeffects or opportunity cost that need to be sacrificed. for government so that they can play an effective role in the management of economic activities by imply tax or subsidize the company.
There are 3 types of economy; planned, market, and mixed. The government plays different role in each of the market, being both a producer and a consumer. There are different limitations to what they can do based on their type of economy. However, to achieve economic objectives of a country, the government needs to be able to influence the total demand and supply of the country, even in a market economy that produces only when there’s demand. These influences on the market are called policies, and they aim to help the government achieve their objectives.
ReplyDeleteThe government has 2 types of policy. The first is demand-side policy that try to influence the country’s aggregate demand. This policy include changing in taxations, amount of government’s expenditure, and the interest rates, divided into Fiscal policy and Monetary policy. The demand-side policies help the government, because the changes in these factors can affect a lot in demand of a product. Taxations, for example, if increased, make everything cost more expensive than it should be. Firms are more unwilling to produce anything. The direct taxes, taxes levied on a person’s income, make it less income for people to spend on, thus increase savings. On the other hand, for indirect taxes, taxes which are put on the prices of goods and services, it makes it costly for people to buy things, so many chose to reduce luxury expenses. If the taxes are decreased, demand will rise and people and firms will choose to spend now. Interest rates, if increased, also push people to save more and borrow less. Also, by increasing government expenditures, there will be an increase in demand and increases output in the country. However, if the idea doesn’t work well, it will cause deficit for the government, as government expenditures use government’s revenue. Inflations are most likely to happen either.
The second policy, the supply-side policy,is more focused on raising the productive potential of the economy, or aggregate supply. They focus on getting labours and higher output in the country. This can be done by using tax and subsidy incentives which affects a person’s decision for their chosen work, improving education and giving training to the people in the country so they have more knowledge on their jobs and increase output, competition policy, in which outlaws all the businesses that abide the rules, such as companies that monopolize the market in order to give new businesses opportunity in the market and thus increases the number of output that a country can produce, even though more businesses means possibility of scarcity of resources to happen soon. The government can also lighten the trade barriers, to encourage free-trade and give our people more experiences with another country and use it to our own advantage. Doing this however, will cause possible decline in demand for domestic businesses because imports overcrowd the domestic products. Nationalized industries such as PT. Jasa Marga in Indonesia are also important, because this way, the government is able to be more involved in the market and can take a better lookout of any possible monopolies, protect employment, and keep externalities to controllable level.
The government can play an effective role in the management of economic activity in a country by imposing policies that can affect the market, such as demand-side policy for aggregate demand and supply-side policy for aggregate supply.
Government is a legally empowered organization that governs or rules in an economy, and it has a vital role in managing the economic activities which are on the go, especially in planned economies, where governments hold a huge part in controlling the economy – which is in contrast to free market economies, where producers are given much more freedom in producing and competing with one another to gain as much profits as possible. Here, there are several actions or policies that government can take or apply to affect the economy. Most importantly, a government would want to keep its economy stable and growing and achieve its economic objectives.
ReplyDeleteIn times of having the economy slowly growing or falling down into recession, also with unemployment rising, the government is able to cut taxes or increase public spending, so that demand may rise back up and production stays at its better rate. Other than that, it can also gives subsidies to producers in order to push productions up and also aggregate demand. This is called the fiscal policy. This policy is good at giving direct impacts on the national income, and therefore, the economy. Also, taxes on de-merit goods like alcohol and cigarettes and drugs can reduce these ‘bad’ consumptions, and taxes on different levels of income can help reduce the gap between the rich and the poor.
However, the inflexibility of fiscal policy might be disadvantageous. Changing direct taxes or public spending may take time due to political reasons, such as creating a higher proportion of tax and implying it on the rich might seem unfair to them. Moreover, fiscal policy usually cannot keep everything ‘stay in place’ when correcting a problem. The result might be another problem showing up. Example is when increasing aggregate demand can worsen inflation, and decreasing demand may lead to better inflation but worse demand-deficient unemployment.
Another way in which the government can affect the economic activities is international trade liberalization. This refers to the trade barriers that government may put on the trade system of an economy to limit the amount of imports. Industries that tend to have this are those in decline, highly unionized, make substantial campaign contributions, or are more geographically dispersed. Having trade barriers can increase the competitiveness between domestic producers and it can raise money for the government instead of building up more deficits. But, on the other hand, it can cause foreign economies to retaliate.
Government uses financial market regulation, aiming to maintain the financial system’s integrity. This is applied in banks, commercial banks, central banks, in order to keep market confidence, financial stability, consumer protection and reduction of financial crime.
In conclusion, all actions and policies done or made by the government use resources, they are not free or easy to take. They need lots of considerations and thought before being applied. That is why good governance is essential to economic development, and that government plays a catalytic, facilitating role, encouraging and complementing the activities of private businesses and also individuals.