Readers question: What are the functions of government in a capitalist economy? In summary, the economic functions of a government include: Protection of private property and maintaining law and order / national defence. Raising taxes. Providing public services not provided in a free market (e.g. health care, education, street lighting) Limit market failure through the …
To what extent has the UK seen cuts in spending to the NHS and health care spending in recent years? In short: Actual spending on the NHS has increased. Real spending per capita has been broadly flat in recent years. As a share of the nations wealth, it is falling and it is true to …
The fundamental economic problem is one of scarcity. The basic questions of economics become: What to produce? How to produce? For whom to produce? You could also add When to produce? What to produce? Given limited resources of labour, raw materials and time, economic agents have to decide what to produce. Most primitive economies …
The government may wish to regulate monopolies to protect the interests of consumers. For example, monopolies have the market power to set prices higher than in competitive markets. The government can regulate monopolies through: Price capping – limiting price increases Regulation of mergers Breaking up monopolies Investigations into cartels and unfair practises Nationalisation – government …
A minimum wage is a legal minimum for workers. It means workers are guaranteed a certain hourly wage – helping to reduce relative poverty. However, a minimum wage could have potential disadvantages – in particular, there is the risk of creating unemployment as firms cannot afford to employ workers. “It has always been a mystery …
A current account deficit occurs when the value of imports (of goods/services/inv. incomes) is greater than the value of exports. Policies to reduce a current account deficit involve: Devaluation of exchange rate (make exports cheaper – imports more expensive) Reduce domestic consumption and spending on imports (e.g. tight fiscal policy/higher taxes) Supply side policies to …
Economic growth means an increase in real GDP – which means an increase in the value of national output/national expenditure. Economic growth is an important macro-economic objective because it enables increased living standards, improved tax revenues and helps to create new jobs. Aspects of economic growth Causes of economic growth Costs/benefits of economic growth Policies …
Definition – A mixed economy means that part of the economy is left to the free market, and part of it is managed by the government. Mixed economies start from the basis of allowing private enterprise to run most businesses. Then the governments intervene in certain areas of the economy, such as providing public services …