Government and Economics: Day 1 – Interventions Or, Why we can blame the Government for all our Economic woes…

Objectives Identify the four types of interventions the government practices with economies Terms: Direct Service Direct Assistance Welfare Social Security Discuss examples of Direct Assistance Medicare / Medicaid Minimum Wage Understand some examples of regulation and control Price Floor Price Ceiling

Remind me… Way back we talked about Economic Systems… What were the FOUR Market Systems? Traditional, Market, Command, and Mixed What separates the four? Level of Government control (as well as focus) NOW we will focus on a the effects of government involvement, but to do so we will focus on mostly a Market System, and what happens when we add it. How much control is there usually in that one?

3 - Regulation and Control 4 - Stabilization and Growth True “Affect”ion While Consumers and Producers have the greatest effect on economies, Government activities affect the economy in four key ways: 1 - Direct Services 2 - Direct Assistance 3 - Regulation and Control 4 - Stabilization and Growth

1 - Direct Services Services provided directly to Consumers, regardless of input i.e. Police Force, National Defense, Highways, Postal System, and…. Education! Does that mean there is no cost? What about price? How might this affect the economy?

2 - Direct A$$i$tance Money provided directly to Consumers or Producers, as long as they meet criteria Sometimes actual Capital, and other times a tax break, or subsidy 3 Key examples…

2 - Direct A$$i$tance Welfare – Medicare / Medicaid – Given to low-incomes families for food and basic needs Covers Medical costs Medicare = Elderly Medicaid = Low-Income Families Food Stamps / EBT / Horizon Social Security – What might be the effect of these? Government mandated retirement plan Why do people get very emotional about these? Paid by current workers for currently retired

3 - Regulation and Control Government sets rules for Economic Transactions i.e. Standards of Quality, Licenses, and OSHA, but also Minimum Wage, Price Floors or Price Ceilings Minimum Wage – based hourly Price Floor – Minimum Price Price Ceiling – Maximum Price

4 - Stabilization and Growth Efforts to increase productivity as a whole country, and… Efforts to combat inflation, depression, and effects of recession These terms will come later!

So… How do these relate to what the Government’s Goal is in Economic Transactions? “Maximize Welfare of Society” Not THAT kind of welfare  Notice that some of these are reactions to something, and others are put in place before a problem exists. Do they always work? Definitely NOT Next time: A Quiz! Next next time: Debt and Deficits Next next next time: Failures

Objectives Identify the four types of interventions the government practices with economies Terms: Direct Service Direct Assistance Welfare Social Security Discuss examples of Direct Assistance Medicare / Medicaid Minimum Wage Understand some examples of regulation and control Price Floor Price Ceiling