Economic Standards Part 2

12.13.1 Commonly accepted responsibilities of government in the economy are things

like economic goals. The four basic economic goals are to regulate business, provide public goods, promote citizens economic well-being, and to stabilize the economy. They regulate business to prevent abuses, protect consumers, limit negative externalities, and promote competition. Providing public goods has responsibilities from the government to private companies. They promote economic wealth by working to improve the standard of living. The federal government acts to stabilize the economy by moderating the business cycle and responding to market failures.

12.13.2 The government produces some goods and services that are available to- and

consumed by- all citizens. The price system failed to assign the cost of public goods among all consumers. The government accomplishes this by charging tax to all citizens for the cost of public goods, even if some people did not use the goods and services directly. They make sure that all public goods and services like education, are available to all people.

12.13.3 Subsides are payments to private businesses by the government. Taxes are

payments to the government by businesses. The government uses these as regulations to prevent pollution, discrimination, and other problems that affect citizens. Loose regulations tend to increase supply and strict regulations tend to decrease supply.

12.13.4 Federal, state, and local governments all receive most of their revenues from

taxes. Individuals and businesses pay income taxes, property taxes, estate taxes, sales taxes, excise taxes, gift taxes, and tariffs. State and local governments also receive revenues in the form of fines paid by individuals from breaking laws within state and local districts.

12.13.5 Proportional taxes are also flat rate taxes. It takes the same percentage of

income from individuals at all income levels. A progressive tax takes a larger percentage of income from a high income person. Regressive taxes take a larger percentage of income from members of high income groups. In the past these may have worked better than they would now because way back when, more people were at an average income than now. Now there is a huge gap between those with high income and low incomes, therefore it would affect the lower income people negatively and more.

12.13.6 Government regulations, rules, are used to prevent pollution, discrimination, and

other problems. Loose government regulations tend to increase supply and strict regulations tend to decrease supply. Higher production costs prevent producers from supplying as many goods and services.

12.13.7 Externalities are side effects that can happen from the production of

goods. These effects may happen for people not directly connected with the production or consumption of the goods. They can also be positive or negative. A negative externality exists when someone who does not make or consume a certain product nonetheless bears part of the cost of its production. In these negative situations the price system fails to assign the entire cost of production to the producers and consumers of the products. A positive externality exists when someone who does not sell or buy a certain product nonetheless benefits from its production. In this positive situation the price system fails to assign the entire cost of production to all those who benefit from that production.

12.13.8 The role of the government in income distribution is to try and reduce the gap

between rich and poor. The government uses systems like transfer payments to do so. Transfer payments in where the government takes money collected from one group of citizens and distributes it to another group of citizens. These work by the government making specific aid programs that distribute income to anyone who meets certain qualifications.

12.13.9 State and local governments rely on property taxes, as well as other taxes.

Property taxes normally apply to houses, factory buildings, condominiums, and the land on which these are built and undeveloped real estate holdings. Some states also collect taxes on personal property like boats and jewelry. Local government depends on property taxes to help finance education, police and fire protection, and sanitation. Property rights can sometimes be unequal. It does take in account the person\'s income. Town, and cities that raise a large amount of money, produce quality public goods. Those who raise less, sometimes have inadequate public goods and services.

12.13.10 Special interest groups are