Allocation of Resources is the Distribution of Valuable Assets in any Economy
Though the allocation of these resources arises as a major issue of concern because the resources of the population as a whole are in limited supply, whilst human wants are usually unlimited, and at the same time any given resource can have several alternative uses.
In the world today, the government plays a more crucial role in other countries than others which are free markets and one good example is the United States more so because of its consumer based society and a capital driven citizenry.The government provides public goods. Public goods possess two features: non-rivalry, this means that the consumption of the good by one person does not reduce the amount available for consumption by another person; non-excludability, this means that once provided, no person can be prohibited from gaining. Though there are few examples of pure public goods, many goods constitute the element of a public good. Defense is a public good. If the population in Kenya increases it does not mean that there will be a decrease in the defense given to the existing population. The government also provides public goods by controlling the budget and supervising the provision of the goods.
Our writers can help you with any type of essay. For any subjectGet your price
How it works
The federal government in any citizenry tries to maintain order and ensure there is growth in the economy. Lack of order may lead to social commotion and political upheavals whereas lack of economic growth may lead to unemployment, inflation and if this continues, it may lead to the invasion of a nation. One good example is the USSR under socialism which could not keep up thus had to break up from the Soviet Union. Today most modern governments take up the role of managing their economies through economic policies which aim at ensuring that there is a stable currency and economic growth that balances both inflation and unemployment.
One such policy is the central planning employed in socialist and communist countries such as China and North Korea. This is done so as to estimate demand and make efficient production decisions. Also in the U.S.A the government regulates certain activities in the market. For instance, the government levies tariffs and create barriers to trade so as to shield the domestic market from foreign competition. Thus the society uses the government to regulate certain actions that may lead to the distortion of the operations of the market which may benefit other competitors.
The government also facilitates for the growth and stabilization of an economy. The federal government determines the rate of economic activity by trying to ensure that they maintain steady growth in their GDP, high levels of employment, and price stability. Therefore this is done by regulating the spending and tax rates or managing the money supply and controlling the use of credit. Thus the government can either slow down or speed up the rate of growth of an economy.
In the United States, the federal government scrutinizes the undertakings of the private ventures in several ways. For instance, through regulation which falls into two wide groups. Financial regulation which pursues to regulate prices, either directly or indirectly. The government has sought to stop monopolies such as machinery equipment from increasing rates beyond any point that would render them rational profits. At, times the government has also extended financial control to other types of firms and in the recent years due to the Great Depression that starts in 1929, it created a composite system to control rates for other products such as the agricultural products, which vary a big deal due to quick changes to response in supply and demand.
It is also notable that each level of government has its own role to provide certain services. The federal government, for instance, is accountable for national security, to run several programs that assist workers to develop workplace skills, to manage exploration .Therefore this establishes that the government expenditure has a major impact on both regional and local economies.
The government offers assistance to various business people. It supports small firms by providing low interest loans and technological support. The government also offers loans to students. For instance, in America an estimated amount of 20million students attend college studies, 12 million or 60% of them whom borrow annually to cover costs.The government also sponsors projects such as allowing people to purchase homes on mortgages and turn them into securities that can either be bought or sold by potential investors. By doing this, the government encourages home lending. The government also promotes trade and exports by reducing trade barriers.
Governments are also employed by the citizenries to effectively run and supervise the economy so as to bring about growth and improvement. This consists of: boosting and promoting both local and foreign investment, monitoring the rate of inflation, sustaining the foreign reserve, reducing the balance of payments deficits and also attaining high rates of employment.
The government presents the legitimate framework and the necessary services required for a market economy to function efficiently. Basically, the legitimate framework regulates the legal status of business ventures, safeguards the rights of private ownership and the privileges bestowed to them, and grants the formation and implementation of contracts. Moreover, the government sets up the legal certain regulations that restrict correlations amongst businesses, resource providers, and consumers. Distinct entities of government referee economic relationships, follow up on any crooked correlations, and enforce consequences.
Government involvement is assumed to enhance the allocation of resources. This is achieved by providing a mode of exchange, guaranteeing product superiority, outlining proprietorship rights, and imposing contracts, the government enhances the quantity and welfare of exchange. Therefore, this enlarges the market and promotes better specialization in the utilization of assets, property and human capital thus advocating further effective distribution of resources.
The government enhances the operation and management of a market system by sustaining competition. Competition is the fundamental regulatory mechanism in the market system. This is because it subjects manufactures and resource suppliers to the directives of consumer sovereignty. With competition, buyers are the superiors, the market is the go-between, and businesses are their employees. Alternatively, if a monopoly assumes responsibility, the monopolist is competent to charge a greater than competitive price. Producer sovereignty therefore supersedes consumer sovereignty.
In conclusion, government involvement takes place in many forms and in various circumstances from taxation, nurturing local and foreign investment, to instigating projects, and other monetary assistance programs. The goals for government intervention may comprise resident security, encouraging social responsibility among many other reasons so as to manage the economy and to cater for peoples needs. Nevertheless, government intervention has its negative impacts especially in the long run. For instance, government investments will increase budget deficits and could hinder economic expansion in the long run, because governments will have to inflate taxes. Therefore by significantly raising the allocation of money and injecting immense amounts of new money – which lacks an equivalent value – into the economy, possibilities are that inflation will be hastened, sooner or later leading to hyperinflation. Therefore, this would insinuate the collapse of a currency and consequently of the whole economy, with subsequent political and social instability.