Why should the government intervene in the economy? Provide a justification.

Question

Quizplus · Accepted Answer

The Answer is The government should intervene in the economy for several reasons. Firstly, to ensure fair competition and prevent monopolies from forming, which can lead to higher prices and reduced choice for consumers. Secondly, to provide public goods and services that the private sector may not adequately provide, such as infrastructure, national defense, and education. Thirdly, to address market failures, such as externalities (e.g. pollution) and information asymmetry, where one party has more information than the other in a transaction. Additionally, government intervention can help to stabilize the economy during times of recession or inflation through fiscal and monetary policies. Finally, the government can also intervene to promote social welfare and reduce income inequality through policies such as progressive taxation and social welfare programs. Overall, government intervention in the economy is necessary to ensure a well-functioning and equitable market system.

Why Should the Government Intervene in the Economy? Provide a Justification