Chap 24 Flashcards
How much the government intervenes in mixed economies differs according to:
- The perceived extent of market failure
- How effective government policy measures are
The government’s influence on the local economy
- State-owned industries- the government decides how much to produce & wages
- Private sector industries- subsidized by the government (eg. to prevent unemployment)
Define Local government
A government organisation with the authority to administer a range of policies within an area of the country.
What does the local government do?
Impose taxes and charges and may receive grants from the national government to provide a range of goods and services including libraries, housing and local roads
Functions of the government
- Owner of industries and assets such as schools and hospitals
- A producer
- A regulator
- Collector of taxes
- Director of the level of economic activity
What products does the government produce?
- Of key importance/ essential and hence should be available to all (housing, on grounds of equity and merit and public goods)
- Produced by a natural monopoly
- Which the private sector may under-produce or not produce
Define Natural monopoly
an industry where a single firm can produce at a lower average cost than two or more firms because of the existence of significant economies of scale
Define the 2 key industries
Strategic industries:
industries that are important for the economic development and safety of the country.
National champions:
industries that are, or have the potential to be, world leaders.
A common form of partnership between the government and private sector firms
The private sector initially provides the finance for a state project, such as the building of a hospital. The private sector firm then builds it and maintains it for a number of years. The government rents it and operates it, buying it back over time.
How does employing people help a government to achieve some of its aims for the economy?
- Reduce unemployment: employ more workers
- Control rises in prices: limit wage rises of its own workers and the prices charged by its enterprises
- Raising the standard of employment practice: providing its workers with good quality training, preventing discrimination and ensuring good pensions to its workers will set an example
The role of the government at an international level
- Promote free international trade, allowing firms to export and import what they want
- Place restrictions on what can be purchased from and sold to other countries
- Policies towards foreign multinational companies (MNCs) wanting to set up in their countries
- Members of trade blocs such as the European Union (EU)
- Belong to international organizations (eg. WTO to promote free international trade)
Why are governments for/against MNCs in their country?
Attract them
1. Generate jobs
2. Increase the output that is produced in the country
Stop them
1. Drive domestic firms out of business
Define Trade bloc
a regional group of countries that remove trade restrictions between themselves
Define Free international trade
The exchange of goods and services between countries without any restrictions