1. Roles of Government in a mixed economy

2. Government in the Circular Flow Model
Supplies goods and services to business firms and households
Demands resources in resource markets
Taxes household income and business revenues
Transfers income to households

3. 7 Roles of Government in a mixed economy
Establishing and enforcing rules of exchange
Property rights
Contract law

4. 7 Roles of Government in a mixed economy
Promoting competition/prevent anticompetitive practices

5. 7 Roles of Government in a mixed economy
Regulating natural monopolies
One firm that can serve the entire market at a lower per- unit cost than can two or more firms

6. 7 Roles of Government in a mixed economy
Provide public goods
Technical characteristics of public goods:
Non rival consumption
High cost of excluding those who do not pay

7. Public v. private goods high Cost of exclusion→ high
Pure public
Cost of exclusion→
Private
high
Degree of rivalness→

8. 7 Roles of Government in a mixed economy
Dealing with externalities Externality is a cost or benefit that falls on third parties and is therefore ignored by the two parties to the market transaction
Negative externality – cost imposed on others
Positive externality – benefit gained by others
Visibility Impairment from Air Pollution Shenandoah National Park - Virginia

9. 7 Roles of Government in a mixed economy
Redistribute income
President F.D. Roosevelt Signing the Social Security Act of 1935

10. 7 Roles of Government in a mixed economy
Promote macroeconomic goals of:
Full employment
Price stability
Economic growth
Monetary policy pursued by the Federal Reserve
Fiscal policy pursued by the Federal government