Textbook chap 7&8.docx - Textbook chap 7&8 Seeking a...

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Textbook chap 7&8 Seeking a collaborative partnership Government cooperates with business for mutually beneficial goals. Influenced by nation’s values and customs. Working in opposition to government Government’s goals and business’s objectives are in conflict Legitimacy issues governments whose legitimacy to be in power is questioned. (Elections rigged or using military force to acquire governmental control) Economic sanctions = When they don’t conduct in that country Public policy: A plan of action undertaken by government officials to achieve some broad purpose affecting a substantial segment of a nation’s citizens. the goals, plans, and actions that each national government follows in achieving its purposes. Another source of authority is common law Elements of Public Policy 1. Public policy inputs external elements that shape government’s policy decisions and strategies to address problems. 2. Public policy goals can be broad and high-minded or narrow and self-serving. 3. Public policy tools incentives and penalties that government uses to achieve policy goals. 4. Public policy effects the outcomes arising from government regulation. Types of Public Policy 1. Fiscal policy government collecting and spending funds to stimulate or support the economy. 2. Monetary policy policies that affect the supply, demand, and value of a nation’s currency. 3. Taxation policy Raising or lowering taxes on business or individuals 4. Industrial policy Directing economic resources toward the development of specific industries 5. Trade policy Encouraging or discouraging trade with other countries 6. Social assistance policies concern social services for citizens such as health care and education. Government Regulation of Business Government establish rules of conduct for citizens and organizations to accomplish public policy. Reasons for regulation Market failure : marketplace fails to adjust prices for the true costs of a firm’s behavior.
Negative externalities : the manufacture or distribution of a product gives rise to unplanned or unintended costs ( spillover effects ). Natural monopolies : without competition, firms could raise prices as much as they want. Common law = past decisions of courts, original basis for legal system Economic regulations To modify the normal operation of the free market and the forces of supply and demand; the oldest form of regulation.

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