Macroeconomics Prof. Kone Presentation: Group 6 Rong Chen Crystal Ratcliff Ning Chen Claudia Lujan Kelvin Sime

What does the Government Do? What does the Government Do? Governmental branches Governmental branches Economic Sectors Economic Sectors How does the size of the public sector in various countries compare? How does the size of the public sector in various countries compare?

What does the Government Do? Government takes place in every economy Government takes place in every economy Responsible for economic policies Responsible for economic policies Standardizes and shapes more policies than policies that are made at local and state levels. Standardizes and shapes more policies than policies that are made at local and state levels.

Solving Public Issues Minimizes problems including working out market imperfections, externalities, and public good issues. Minimizes problems including working out market imperfections, externalities, and public good issues. Decreases interferences due to business cycles. Decreases interferences due to business cycles. Proclaims the actions by firms or consumers to be fraudulent or illegal. Proclaims the actions by firms or consumers to be fraudulent or illegal. Citizens call on the government for protection against the periods of dry spells or lack of income within a business. Citizens call on the government for protection against the periods of dry spells or lack of income within a business.

Goods and Services Police protection and the national defense are examples of public services that are provided by the Government. Police protection and the national defense are examples of public services that are provided by the Government. Here, the consumption of a good by one person will not minimize the quantity or quality available for others. Here, the consumption of a good by one person will not minimize the quantity or quality available for others. The issuance of the above mentioned public goods and services eliminates the free rider problem that would occur if private firms provided the goods. The issuance of the above mentioned public goods and services eliminates the free rider problem that would occur if private firms provided the goods.

Spending and Control of Money Upheld by the Government. Upheld by the Government. Monitoring of Government spending and money supply is done to prevent budget deficits. Monitoring of Government spending and money supply is done to prevent budget deficits. Fiscal and Monetary policies are what make up the macroeconomics standpoint. Fiscal and Monetary policies are what make up the macroeconomics standpoint. These policies are attempts to control business cycles. These policies are attempts to control business cycles.

Competition within the Economy The Government promotes competition and regulates industries in which free market competition may not exist. The Government promotes competition and regulates industries in which free market competition may not exist. Monitors other industries to promote competition. Monitors other industries to promote competition. Free market meaning the price of an item is arranged by the mutual consent of sellers and buyers, with the supply and demand of that item not being regulated by a government. Free market meaning the price of an item is arranged by the mutual consent of sellers and buyers, with the supply and demand of that item not being regulated by a government.

Institutions Commerce Department Federal Reserve Treasury Department

Congress / Presidential Role Regulate / Provide public and private policies. Regulate / Provide public and private policies. Provides leadership in formulating fiscal policy Provides leadership in formulating fiscal policy Congress Congress Sets government spending and taxes Sets government spending and taxes Passes laws related to economic conduct. Passes laws related to economic conduct.

Central Leadership Treasury Department International Trade Commission Commerce Department Federal Trade Commission Council of Economic Advisers Federal Reserve Justice Department Office of Management And budget

Controls money supply and credit condition Controls money supply and credit condition Monitors the economy and advices the president Monitors the economy and advices the president Administers federal policy regulating industries Administers federal policy regulating industries Enforces legal setting of business Enforces legal setting of business Oversees national banks Oversees national banks Roles

Economic Sectors The government plays a role in every economy, but in some countries, the public sector plays a larger role in the economy than in the United States. The government plays a role in every economy, but in some countries, the public sector plays a larger role in the economy than in the United States. There are two different kinds of economic system; one is called centrally planned economy and the other is called Market economy. There are two different kinds of economic system; one is called centrally planned economy and the other is called Market economy. The size and influence of the public sector ranges from the market economies of the United States to the centrally Planed economy of Cuba. The size and influence of the public sector ranges from the market economies of the United States to the centrally Planed economy of Cuba.

Con’t In the United States, we have the Market economic system, in this system, the public sector plays a small role in the economy and it relies on individual actions to solve economic problems. In the United States, we have the Market economic system, in this system, the public sector plays a small role in the economy and it relies on individual actions to solve economic problems. By contrast, we have Cuba, which implements the Centrally Planned economic system in which the state or government controls the factors of production and makes all decisions about their use and about the distribution of income. By contrast, we have Cuba, which implements the Centrally Planned economic system in which the state or government controls the factors of production and makes all decisions about their use and about the distribution of income.

Comparison of Public Sector Sizes in Various Countries Market Economy Market Economy United States United States Less than 25% of the U.S Outputs goes towards Government Expenditures. Less than 25% of the U.S Outputs goes towards Government Expenditures. Centrally Planned Economy Centrally Planned Economy Cuba Cuba About 75% of Cuba’s Output goes towards Government Expenditures About 75% of Cuba’s Output goes towards Government Expenditures

The Size of the U.S. Public Sector Why is the U.S. considered a market economy? Why is the U.S. considered a market economy? People can own business People can own business People can be private land owners People can be private land owners People are entitled to purchase what they want People are entitled to purchase what they want U.S. rely on the decisions of individuals U.S. rely on the decisions of individuals United States has relatively small public sectors. United States has relatively small public sectors.

The Size of Cuba’s Public Sector Why is Cuba considered a Centrally Planned economy? Why is Cuba considered a Centrally Planned economy? People are NOT free to start a business People are NOT free to start a business Can only buy what the government has available for them to buy. Can only buy what the government has available for them to buy. They work as employees of the state They work as employees of the state Rely on Government to answer economic question for all individuals Rely on Government to answer economic question for all individuals Public Sector is the principal component of the economy. Public Sector is the principal component of the economy.

The Size of Germany’s Public Sector Although Germany may have a market economy it’s Public Sector plays a more significant role compared to the U.S. Although Germany may have a market economy it’s Public Sector plays a more significant role compared to the U.S. Germany’s Government fosters social programs Germany’s Government fosters social programs Regulates business hours Regulates business hours Ports minimum prices Ports minimum prices Imposes rent control Imposes rent control Regulates hiring and firing of employees Regulates hiring and firing of employees

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