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Role Of Government In Market Economy

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The market economy is an intricate mechanism for facilitating individuals and businesses through both prices and markets. The government manages the general pace of economy by endeavoring to keep up enduring growth and high amount of employment and stable prices. The market is part and parcel from our daily life as it is a mechanism where buyers and sellers exchange goods and services and decide upon the price which acts as a signal the balances the market for both buyers and sellers. In addition, economics has an exclusively influential device for clarifying changes in the economic life. it is called hypothesis of supply and demand. The government has a significant role in market economy as they have to consider efficiency, macroeconomic stability …show more content…

Not only that but also, to give entrepreneurs an opportunity to take risks and to be potent to know and gather society’s needs. the government has a crucial impressive role in influencing the market as they have to boost efficiency by restraining externalities which are side effects that affect the market in unintended way and are not paid for, and this is when a market witness a failure ;therefore the government intervention is vital to overcome these actions. For example, pollution is negative externality that the government should try to clear it. In addition, there are other market failures that have to eradicate as monopolies and oligopolies as they are the ones who lower output and increase the prices. Secondly, government has to advocate equity by providing taxes to reshuffle income among groups as the equity is dominant part which the government should enhance by redistributing income; thus destitution may be understated. This will be beneficial for the economy and the community. Thirdly, the government has to cherish macroeconomic stability as they have to diminish the problem of unemployment. Over and above, the government has an integral part to see if the markets are operating efficiently or

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