chapter 24 - role of government

Question 1

general role of gov?

Answer 1

• collect tax revenues to fund expenditures

- general welfare of its people

Question 2

what do all levels of government provide?

Answer 2

• merit goods
• welfare goods
• public goods
• public services
• infrastructure
• employment
• support agriculture & other prime industries
• redistributing income & welfare schemes
• manage macroeconomy (price, growth, welfare, income redistribution)
• manage trade in goods & services

Question 3

what are the 3 government level?

Answer 3

• local
• national
• international

Question 4

local gov role?

Answer 4

responsible for vital services for people and business in defined areas
e.g. rubbish collection, libraries, school

central gov fund these services (funds from taxes)

Question 5

national gov role?

Answer 5

central gov makes decisions on how to achieve macroeconomic aims like:

• economic growth
• low rate of unemployment
• stable price levels
• healthy balance of payments

e.g. road building, cuts in income tax, setting interest rate, changing laws protecting employees

Question 6

what are the policies needed to achieve macroeconomic aims?

Answer 6

• supply-side policy (aims to increase supply and productivity of economy)
• monetary policy (central gov instructs monetary authority to make decisions about interest rates and money supply to influence economy activity)
• fiscal policy (how to raise money through taxation and work on annual budget)
• policies to protect environment

Question 7

international gov role?

Answer 7

involves an international dimension as modern economies need to trade with other countries

e. g.
- deciding on immigration levels
- setting level of tariffs & quotas (limited quantity) on imports
- negotiation of trade level
- policies to fix exchange rate

Question 15

definition of:

trading bloc

Answer 15

a free trade area which also promotes the free movement of factors of production between member countries