Republic Central Colleges

Angeles City

Jemarie M. Salac
BSA-IV, ECON 3
Mr. Christian C. Micaller

Reflection about the importance of the government in the economy

The government supports the economy when it facilitates transport and communication via
the postal service and highways and establishes the police and military to safeguard life and
property. Local or state governments support the economy by funding education and
building roads.
Governments devise rules that ensure businesses operate in the best interests of the public.
For instance, the government may allow a monopoly to operate in a market or industry with
little competition, such as in utility services, but limit the companys freedom to increase
prices to avoid hurting consumers who would have no recourse.
A government devises monetary policies to keep the economy growing at the desired pace.
By controlling circulation of money, adjusting interest rates and tax rates, and controlling
access to credit, the government can control the inflation or the decline of the economy.
Likewise, the economy is affected when the government gives certain businesses
preferential treatment, such as by limiting foreign competition in a specific market or
imposing higher taxes on imports to boost domestic production.