Question

In: Economics

We have discussed in past modules how government can impact the economy (price floor, price ceiling,...

We have discussed in past modules how government can impact the economy (price floor, price ceiling, regulating monopolies, and externalities). The government is, no doubt, an economic influencer. So, let's do it one more time but remember, this is an economic discussion, not a political one.

  1. Your opinion on the role of government in our economy. Please offer a compelling economic argument for your opinion here (supply & demand). What are the economic implications of bigger government? What are the economic implications of smaller government? What would be the most allocatively efficient option?
  2. What lessons were taught to children in the cartoon "The Little Red Hen?" How could those lessons be valuable today as they relate to the role of government?

Solutions

Expert Solution

Some governments have tried to exercise full control over the economy and some have preferred to stay completely out of economic affairs. They believe that the economy performs best when they are not regulated.Today the role of the government lie in between these two views.The world's largest economies are capitalist which believes in freedom of property and competition with one another to have profit and economic well being.In such economy ,the central authority does not decide what goods to produce or decide prices for the goods and services .In such economies the competing forces of sellers (supply) and buyers (demand) determine the price and the goods to be produced and distributed.The US government also  tries to stabilize the economy using fiscal and monetary tools as well This helps in steady growth, low unemployment and stable prices in the economy.

Big government mean inefficient, bureaucratic corrupt government.Big government interferes with the free enterprise.Small government is a efficient and flexible system. Government interference is less here.In reality big and small are subjective terms depending on how it is defined by a person.

The small government is the best government that gives freedom to its citizens and broadens the opportunities provided to them.

The lesson taught to the children from the story is that if they work hard they will get reward.It said that initiatives and hard work paid great reward in the end.This moral can be related to the role of the government.Many people have expectation that the government will provide for them . Those who work hard and earn ,have right to keep with them what they have earned without sharing with others who did not work hard to earn.


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