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6. Government's Economic Function View EntireChaptere  2/27/19


      A. Provide a proper legal atmosphere (rules) for capitalism
      B. Insure competition
          1. Antitrust laws protect against abuse of monopoly power.
          2. Natural (justifiable) monopolies such as AT&T were allowed because 
              duplicating high-cost fixed investments is illogical.
          3. The emphasis on free markets discussed in chapter 3 has resulted in some natural
              monopolies being broken into smaller companies which had to compete against
              new companies touting  new technologies.
      C. Provide for an equitable distribution of income
           1. Transfer payments where a government moves general revenue to a
               specific group, i.e., Aid to Families with Dependent Children, students...

      
2. Market Intervention (affecting supply and demand)  
              a. Minimum wage decreases supply raising price and lowering quantity.
              b. Excise taxes on alcohol, cigarettes, jewelry, etc., deceases supply.
              c. Farm price supports, aid to small business and education increases supply.
    
  D. Adjust for market failures
           1. Adjust for spillovers (externalities)
               a. Effects of a market system often spillover onto non-participants who are
                   external to the market transaction. 
               b. Both costs and benefits result.
                   1. Pollution hurts (costs) society so government tries to affect the supply of,
                       and demand for, pollution causing products such as automobiles. 
                       For automobiles, they lower supply by requiring catalytic converters and
                       they lower demand with high excise taxes. 
                   2. An educated workforce benefits society so government increases demand
                       (aid to students) and supply (aid to colleges).

 

                   3. Currently, our addiction to gasoline is high, as has global warming hasasasasasasasasas
                       government's attention, but little action.

      E. Affecting total economic activity
          1. This includes a multitude of diverse topics. 
              a. Trying to limit the effects of business cycles by lowering unemployment and
                  inflation 
              b. Assisting companies trying to compete in the new global economy 
              c. Using foreign aid to make sure we have stable oil prices  
                  1. Israel-United States military relations
                  2. US and Foreign Aid Assistance from GlobalIssues.org
          2. Opinions differ substantially as to the responsibilities or lack of responsibilities
              government has in these areas.