Answer to Question #105598 in Microeconomics for Tawonashe Manzungu

Question

in each of the following what is the governments role ? Does the governments intervention improve the outcome ?

Answer 1

The role of the state in the national economy consists in managing monetary policy, in regulating trade (protectionism and / or liberalization, supporting fair competition), and fiscal policy. The state also acts as a subject within the national economy and performs the functions of the subject. On the one hand, the state should not interfere in market processes, because the market must independently determine the price, quantity of goods, etc., the state can harm with its excessive presence. On the another hand, state regulation is necessary so that the market does not harm itself with “soap bubbles”, unfair competition, etc.