Explain the relationship between Government and Economics.?
Answer:
Economics is the study of scarcity.
One of government's primary jobs is to collect and reallocate wealth (i.e. taxes).
The government has a huge impact on determining economic policy, and generally controls a portion of the workings of the economy.
But the economy is much larger than just the government. The economy (and economics) encompasses the whole of the financial system.
So the relationship is such that Economics (or the economy) exists, like weather. Gov't attempts to influence it.
Hope that helps.
Economics is the study of what gets produced, how it gets produced, and who gets what is produced, given scarce resources and unlimited wants.
As the previous poster said, government attempts to influence the economy. I would say specifically that it influences the economy in three ways:
1) Creates an environment conducive to the conduct of business. This means just rule of law and a level playing field for economic participants.
2) Addresses market imperfections. A perfect market economy assumes many things like perfect information, fungibility of resources, and an unlimited number of consumers and producers. These assumptions are often not met in practice, and government usually addresses these imperfections via regulation.
3) Address social inequalities. Economics is value-neutral in that it addresses what happens in the economy, not what is "fair" in the economy. There is a wide divergence of opinion on what is the proper level of government intervention to address social equity, but if you wish to intervene, this would be a role of government.
You have 2 types of economics.
A government controlled economy, which seems to be working well in Communist China.
And you have a FREE market economy, which is what made the USA prosperous up to about 1929.
Free market economy is when the banking is done at the local level in the private sector, little or no taxation, and little or no gvt. controls over commerce. The system prospered with 'NO' inflation for about 130 years in the USA, under the ""GOLD"" standard.
Congressman Ron Paul is the only current candidate that wants to return to an inflation free Gold standard.
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