EFFECT OF GOVERNMENT IN ECONOMY

Effect of Government in Economy

Effect of Government in Economy

Create laws, rules and regulations

Governments determine the legal framework that establishes the ground rules for property ownership and the operation of the markets. If the legal framework outlawing the private ownership of the business, the economy is socialist, if the businesses are owned by individuals and privately managed with the objective of profit, a capitalist economy. Even in capitalist economies, there are limits to property rights. Not everyone can own a gun.

The people cannot freely use their property, usually is forbidden to build factories in residential areas. Moreover, governments generally regulate economic behavior by establishing detailed rules for business operation.

The regulations include planning (how to use the land and where business can be established), health and safety regulations, and attempts to ban some businesses, like selling drugs. Some regulations affect all businesses, some examples are laws against fraud and laws that prohibit companies agree on prices. Some regulations affect only certain industries, such as the requirement that physicians have the appropriate qualifications (Sullivan, 2003).

Buy and Sell Goods and Services

Governments buy and produce many goods and services, such as defense, education, public parks, roads, offering businesses and households. Many of these goods, like defense and education, are provided to users without direct charge. Some, such as public transport and government publications, are paid directly by purchasers.

Governments, like private companies, must decide what to buy and produce them. For example, governments typically buy computers, but do not develop their own programs that need to run them. To achieve this, governments must act as buyers in the market for computer programming services.

Governments also produce and sell goods. In some countries, the telephone company is owned by the government, in most countries, the government owns and manages the public transport like buses ...