Question

How does the government influence the economy in DETAIL? And could you give me 2 examples?

Answer 1

Government attempts to influence the economy. The national budget generally reflects the economic policy of a government, and it is partly through the budget that the government exercises its three principal methods of establishing control: the allocative function, the stabilization function, and the distributive function.Governments may make policy changes in response to economic conditions. Government regulation of the economy is frequently used to engineer economic growth or prevent negative economic consequences.

Government economic objectives include:

• Low unemployment, that is, as many workers in jobs as possible.
• Lower prices. Continually rising prices is called inflation. Low inflation is an aim of government.
• Economic growth. The aim is to produce more goods and services each year so that individuals have a higher standard of living.

The government can change the way businesses work and influence the economy either by passing laws, or by changing its own spending or taxes. For example:

• extra government spending or lower taxes can result in more demand in the economy and lead to higher output and employment
• governments can pass legislation protecting consumers and workers or restricting where businesses can build new premises.

Examples - If government want to increase it's own revenue , the government can impose taxes on it .

If there is a situation like Covid 19 , then government spending is higher to fight with such pandemic .