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Should the Government be involved in the Economy?
•Do we trust each other to make the right decisions?
•Are people inherently good or inherently evil?
•Can businesses be trusted to operate rationally under a market economy?
•Who will take care of the common good?
- •What level of government should do it be?
- - Federal, state, local
•What is the primary goal of government involvement?
•Should the government pay for common goods and if they should, how?
Considerations for Government Involvement
Quality of Life for constituents
Quality of market for businesses
Growth versus Tradition
Government aid versus market competition
Fairness versus attractiveness
Levels of Government
- •Tax Incentives to Corporations
- •Aid in building, or outright building, the plant and infrastructure
- •Sewage extension, Lighting, Power lines and sources
- •Tax incentives to Corporations
- •Offer larger infrastructure development
- •Build freeway system to the plant and allow easier connectivity for export of product.
- •Subsidized labor training
- •Low interest loans
- •Relaxed regulations
- Federal Level:
- - For Businesses
- •Aid in Research and Development
- •Monopoly “busting”
- •Regulatory Agencies
- •Military Protection
- •Trade Agreements with other Countries
- Federal Level:
- - Macroeconomics: For Society
- •Fiscal Policy
- -Taxing and Spending
- -Controlled by the President and Congress
- Monetary Policy
- -Regulation the amount of money in circulation
- -Controlled by the Federal Reserve
Competing Theories for Governmental Involvement
- Classical Liberalism
- •Let businesses regulate themselves
- •Laissez-Faire, Laissez Passer
- “Let it be, leave it alone”
- •Adam Smith, John Locke, Voltaire, David Hume, Bernard Mandeville
- •The idea of Spontaneous Order, order that arises through human action instead of human design.
- •“Greatest Good for the Greatest Number”
- •Jeremy Bentham, John Stuart Mill
- Governmental Intervention
- - Keynesian Economics
- •John Maynard Keynes
- •Governmental duties and economy are linked
- •Spend money and give tax cuts when the economy is in dire straits
- •Increase taxes when the economy is booming
- •Focused on Unemployment as the root problem
- •Phillips Curve
- ↓Unemployment ↑Inflation
-Supply-side Economics (trickle down)
-Focus on Inflation as root problem
-To lower inflation, money needs to be removed from circulation
-Theory-get people to save money by giving tax cuts
-Application-people spent the money they saved from taxes
Capitalism and Democracy
Both are market driven, people invest, either money or time or vote, for a product.
Are they compatible?
-Capitalism is based on private ownership
-Democracy is based on majority rule
Equality of Results- Liberals (Modern day not Classical)
Equality of Opportunity-Conservatives
What would you like to do?
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