Government and the Economy Chapter 16 Section 1 and 2 Government and the Economy

Clip of the Day

Growth of Government Beginning with the Great Depression the size and scope of federal government has grown greatly. Why? Is this good or bad?

Public Works Projects Publicly used facilities built with public money (Ex. Schools, highways) Public Goods – Goods or services provided by government for consumption by the general public. Can be provided by federal, state, and/or local governments.

Types of Goods Government Supplies National defense, police/fire, merit goods, social-insurance programs, public-assistance programs, regulate the economy and create stability. Merit Goods – Goods that are deemed socially desirable by the public (Example – Museums and parks) Demerit Goods – Goods that are unaccepted (ex. smoking, drinking) – Often heavily taxed by government to discourage usage – “Sin Tax”

Promoting the General Welfare Social-Insurance Programs – Programs that pay benefits to retired and disabled workers, their families, and the unemployed.

Ex. Social Security – Federal program that provides monthly payments to people who are retired or unable to work. Medicare – Healthcare for retired workers

Cont. Workers Compensation – State program that provides payments for medical care for workers who are injured on the job. Unemployment Insurance

Public Assistance Programs Public-Assistance Programs (Welfare) – Need based programs Supplemental Security Income Temporary Assistance for Need Families Medicaid

Regulation and Economic Stability Externalities – Side effects (can be negative or positive) Economic Stability Intervention against harmful effects of economy (unemployment, high inflation, recessions)

Critics of Government Involvement Merit Goods – Should be private Government Assistance Programs – Discourage motivation