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Unformatted text preview: nformation you
learned in this chapter to find solutions to the following problems. B 21.5%
7.2% A B C (b) Go to www.emcp.net/economics and choose Economics:
New Ways of Thinking, Chapter 14, if you need more help in
preparing for the chapter test. Chapter 14 Taxing and Spending 387 14 (364-389) EMC Chap 14 11/18/05 10:59 AM Page 388 What Is Government’s Role
When It Comes to the
Economy? P eople often disagree as to what the federal government’s role should be regarding the economy. For
example, some people argue that the federal gov- ernment should try to stabilize the economy. These people would have gone on much longer than
Before the Great Depression, many
people used to think that a free enterprise
economy could take care of itself. It wouldn’t
produce too much inflation and it wouldn’t
bring on an economic contraction. Well,
then, how do you explain the Great
Depression? The unemployment rate rose
to 25 percent during that time. The government had to do something. say that if the economy is in a recession, the government Francine Watermaker,
registered nurse should implement expansionary monetary and fiscal policy
to stimulate the economy. This may mean increasing the
money supply and cutting taxes to stimulate spending.
Others argue that if the government hadn’t implemented the
wrong monetary and fiscal policies in the past, there would
be no recession to combat. The question becomes: does government mainly make the patient (the economy) sick, or
does it mainly make the patient (the economy) well when it
Sometimes people disagree about what goods and services the federal government should provide to the citizens.
Is it government’s role to deliver the mail and care for the
sick and elderly, or is it better if government limited itself to
building the roads and providing for the national defense?
How much or how little should government do? Let’s listen
in to what some people have to say. Hamid Khatami,
t seems to me that the Great Depression
settled the issue of government’s role in
the economy. I believe that if government
hadn’t come to the rescue, and provided
people with jobs, and stimulated spending
in the economy, that the Great Depression I 388 Unit IV Macroeconomics ’m not sure that Hamid has the explanation of the Great Depression correct. I
don’t think it was free enterprise that failed.
I think it was government doing the wrong
things. It was the government overspending
in the 1920s and planting the seeds of the
economic contraction. It was the government placing high tariffs on imported goods
and making the contraction worse than it
would have been. It was the Fed cutting the
money supply too much. If anything, the
Great Depression was a failure of government, not free enterprise. The way I see it,
government makes more problems for the
economy than it solves. Sure, the government can do some things right, but government today is into more things than it can
do. I am i...
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This document was uploaded on 01/16/2014.
- Winter '14