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Exam4Review - 1 Describe the six functions of...

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1. Describe the six functions of budgeting. -Maintaining Legal and Social Framework : Create laws and provide courts, provide information and services to help economy function better, establish a monetary system, define and enforce property rights. -Maintaining Competition : Create and enforce antitrust laws, regulate natural monopolies -Providing Public Goods and Services : Provide goods and services that markets are unable or unwilling to provide (national defense) -Redistributing Income : Higher income tax rates for rich than for poor, provide social security and aid to dependent children (Medicare or Medicaid) -Correcting for Externalities : Taxes to reduce negative externalities (environmental pollution), subsidies to encourage positive externalities (education). Externalities exist when some of the costs of benefits associated with the production or consumption of a product “spill over” to third parties other than the direct producer or consumer of the product.
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