Role of Government in the Economy Essay Example | Topics and Well Written Essays - 1500 words

Role of Government in the Economy - Essay Example From this research it is clear that the government has provided guidance to the progressive movement of the economic activities taking place with the intention of sustaining the continuous economic growth; as well as providing employment and ensuring the stability of the prices of good and services. This means that in the US, the government has an involvement in the acceleration of the economy’s growth rate through the adjustment of such distributions. Other factors include the spending of funds and tax rates through the government management of money supply with the application of control to these monetary policies. Although having said this, it does not necessarily imply that the term would indicate the complete control on economic activities, rather, the term only suggests how the government plays an important role in the stabilisation of the economy.This essay highlights that  Neo-classical economics concentrates predominantly on the importance of individual and personal economic preferences, market equilibrium, and the balance between supply and demand.  These points are at the center of the neo-classical suppositions of the economy, which are the main trend to the perspective idea of capitalism. The most basic unit of the theory of neo-classical economics evolves into the concept of individual ownership, and initially its focus is on how individuals decide or manage their properties. This theory is primarily concerned with how an individual enjoys the profits in the context of the benefits that they receive from their properties, and thus changing the amount by which will be gained from their property which may also attribute to the social convenience or suffering (Veblen, 1969). Veblen (1969) also believed that an individual can be compared to a computer that mechanically benefits through its given data. The change of that data itself might result in them knowing to put themselves into a position where they will be able to meet various needs. This is the idea of capitalism, a social system that favors individual needs and rights. The neo-classical theory focuses onto the consumer, and how individual consumption will powerfully influence the behavior of the production, the needs of the consumer that has been granted by the market (Goodwin et al, 1997). The stability of the equilibrium in the economy is in the equal distribution of supply and demand. Every individual based on this theory has the right to be involved in the â€Å"free market†, wherein sellers and buyers have each others contribution in setting the price of a particular product (Barrons, 1995). Through this principle, it is not the government that will control the supply and demand of a p articular product as the free market is governed with the market forces (supply and demand), wherein prices are set toward equilibrium. This maintains the balance of the demands as opposed to the supply of the products. Although the government does not possess an absolute power over the economy, the government does have the role in the economic development which, according to neo-classical theory is essential to economic growth. The main responsibility of the government in the economic sector is to secure business cycles which do not mean harm to individual rights, constituting peace and order and protecting every citizen, both consumers and capitalists against frauds and the