Nevertheless, the government must be cautious when setting and applying regulations, as an incorrect comprehension of the market structure may bring a higher cost to social welfare instead of the expected benefits. We'll use concrete examples to help you understand these hotly debated issues. Welcome to EconomicsDiscussion.net! ; Maximizing social welfare is one of the most common and best understood reasons for government intervention.Examples of this include breaking up monopolies and regulating negative externalities like … However, the government compensates this restriction by increasing the aggregate demand and purchasing goods and services from the private sector. The finance minister says that for the economy to grow and transformation, South Africa needs massive industrialisation in the secondary sectors to create jobs and wealth on a sustainable basis in pursuit of radical economic transformation and inclusive growth. Its main fiscal objective is to ensure sustainable finances by containing the budget deficit and stabilising public debt. Sometimes, the outcome of these actions can be hard to predict. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. Government intervention is necessary to redistribute income within society. If the level of profitability is high, then the investment by the private sector would reduce and get confined to rate of interest only. Government intervention is any action carried out by the government or public entity that affects the market economy with the direct objective of having an impact in the economy, beyond the mere regulation of contracts and provision of public goods. If investments don't pan out, some argue that the government could have trouble affording the interest on the national debt, though not all economists agree on these issues. However, in a mixed economy, the government is responsible for making and implementing various regulatory measures. The main promotional role of a government is to increase the social and economic overhead capital for the growth of an economy. A buffer stock involve a combination of minimum and maximum prices. Mike Moffatt, Ph.D., is an economist and professor. These measures are required to prevent the socially restrictive activities of businesses and concentration of economic power and encourage private businesses to work towards the growth of the economy. These regulations set rules for wages and hours, gave benefits to unemployed and retired workers, established subsidies for rural farmers and local manufacturers, insured bank deposits, and created a massive development authority. Although, high rate of tax imposed by the government on private businesses seems to a restriction in their growth. Sciences, Culinary Arts and Personal imaginable degree, area of The development infrastructure of an economy involves economic and social overhead capital that is necessary for the growth of industries and optimal utilization of resources. Log in here for access. JOHANNESBURG - Finance Minister Malusi Gigaba says the economic history of the Asian economies which grew strongly after the second World War exposed the myth that governments are only incidental to economic development. Picture: GCIS. Recessions and inflation are part of the natural business cycle but can have a devastating effect on citizens. Two students are arguing about the economy. The roles of a government, in a mixed economy, is grouped into two categories, namely, regulatory roles and promotional or development roles.

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