Role Of Federal Governments

Role of  Federal Government’s

Introduction:

The federal government’s role is to fine tune the economy to achieve high levels of economic growth and stability, provide high employment, maintain inflation rates low and also raise the standards of living of its citizens. This is done through the use of monetary and fiscal policies, monetary policies include the use of interest rates, bank reserve ratio and money supply. Fiscal policies include the use of government spending and also government taxation.

The government will therefore use this tools at its disposal to achieve its long term goals and objectives of high employment levels, high GDP levels, stability in the economy and low inflation, in this paper we discuss the principle of economics that states that the government has a role to play in improving market outcomes and also the principle that inflation and unemployment are inversely related.

The government role in improving the economy:

Government spending

Role of Federal Government’s

Government spending is a way in which the government provides public goods and also ensures the economy tend to full employment, however government spending sometimes is inflationary but when mix policies are used when a government spending occurs then the economy will move near full employment level, this fiscal year ending 2007 the united states government spending amounted to 4877 billion dollars compared to the previous year government spending for the fiscal year ended 2006 which amounted to 4664 billion dollars according to the US government spending report website.

This increase in government spending was aimed at increasing the level of employment in the economy as the economy tends towards full employment, therefore government spending will be inflationary but when other monetary policies are used then the government will achieve high levels of employment, due to this increase in government spending the economy achieved lower unemployment levels and at the same time higher GDP levels than the previous year records.

Government and externalities:

Many scholars have argued for a free market economy, however there is need to improve the market when there is market failure and also the existence of negative externalities, recently in the united states the importance of government involvement in improving the economy has been a major issue, the issue of environmental degradation, externalities and market failure have been tackled by the government because the market fails to provide solutions to some of the problems in the economy, externalities occurring as a result of production tend to make the government to come in an improve the situation, there has been increased pollution and at the same time deforestation, the government has therefore increased taxation on the firms that emit poisonous gases that lead to environmental degradation, also it has increased taxes on fossil fuels that are major contributors to environmental degradation.

The market in the United States have failed to compensate for the negative externalities it

Role of Federal Government’s

produces during its production process, therefore the government has increased taxation on the firms and also fossil fuels so that it they will adopt other environmental friendly sources of power, deforestation has increased and the government has banned any logging in the country as a way to protect the environment from further degradation.

Conclusion:

The government has a role to play in the economy, scholars have advocated for a free market economy but there is a need to improve the economic performance of the free market through the interference by the government, the government will use fiscal and monetary policies to fine tune the economy to achieve high levels of GDP, high employment and stability in the economy.

References:

Gregory Mankiw (2004) Principles of economics, web book

US spending (2007) United States federal government spending, retrieved on 18th August, available at

www.usgovernmentspending.com/index.php

Role of Federal Government’s

Introduction:

The federal government’s role is to fine tune the economy to achieve high levels of economic growth and stability, provide high employment, maintain inflation rates low and also raise the standards of living of its citizens. This is done through the use of monetary and fiscal policies, monetary policies include the use of interest rates, bank reserve ratio and money supply. Fiscal policies include the use of government spending and also government taxation.

The government will therefore use this tools at its disposal to achieve its long term goals and objectives of high employment levels, high GDP levels, stability in the economy and low inflation, in this paper we discuss the principle of economics that states that the government has a role to play in improving market outcomes and also the principle that inflation and unemployment are inversely related.

The government role in improving the economy:

Government spending

Government spending is a way in which the government provides public goods and also ensures the economy tend to full employment, however government spending sometimes is inflationary but when mix policies are used when a government spending occurs then the economy will move near full employment level, this fiscal year ending 2007 the united states government spending amounted to 4877 billion dollars compared to the previous year government spending for the fiscal year ended 2006 which amounted to 4664 billion dollars according to the US government spending report website.

Role of Federal Government’s

This increase in government spending was aimed at increasing the level of employment in the economy as the economy tends towards full employment, therefore government spending will be inflationary but when other monetary policies are used then the government will achieve high levels of employment, due to this increase in government spending the economy achieved lower unemployment levels and at the same time higher GDP levels than the previous year records.

Government and externalities:

Many scholars have argued for a free market economy, however there is need to improve the market when there is market failure and also the existence of negative externalities, recently in the united states the importance of government involvement in improving the economy has been a major issue, the issue of environmental degradation, externalities and market failure have been tackled by the government because the market fails to provide solutions to some of the problems in the economy, externalities occurring as a result of production tend to make the government to come in an improve the situation, there has been increased pollution and at the same time deforestation, the government has therefore increased taxation on the firms that emit poisonous gases that lead to environmental degradation, also it has increased taxes on fossil fuels that are major contributors to environmental degradation.

The market in the United States have failed to compensate for the negative externalities it produces during its production process, therefore the government has increased taxation on the firms and also fossil fuels so that it they will adopt other environmental friendly sources of power, deforestation has increased and the government has banned any logging in the country as a way to protect the environment from further degradation.

Role of Federal Government’s

Conclusion:

The government has a role to play in the economy, scholars have advocated for a free market economy but there is a need to improve the economic performance of the free market through the interference by the government, the government will use fiscal and monetary policies to fine tune the economy to achieve high levels of GDP, high employment and stability in the economy.

References:

Gregory Mankiw (2004) Principles of economics, web book

US spending (2007) United States federal government spending, retrieved on 18th August, available at

www.usgovernmentspending.com/index.php