Lesson Monday November 1, 3, and 4th

WHAT ARE THE ECONOMIC FUNCTIONS OF GOVERNMENT?

Lesson Description

INTRODUCTION

In order to ensure and support economic freedom as well as political freedom, the founders of our nation envisioned a very limited role for the government in economic affairs.

In a market economy, such as the one established by our Constitution, most economic decisions are made by individual buyers and sellers, not by the government.

Economists, however, identify six major functions of governments in market economies.

1. Governments provide the legal and social framework, maintain competition,

2. provide public goods and services,

3. redistribute income,

4. correct for externalities,

5. and stabilize the economy.

Citizens, interest groups, and political leaders disagree about how large a scope of activities the government should perform within each of these functions.

Over time, as our society and economy have changed, government activities within each of these functions have expanded.