ABUTANATIN, John Lloyd Y.

BSBA – MM / Block A – 2nd year

Microeconomics

Question:
1. Up to what extent should the government intervene in the economy?
Answer:
- The extent to which the government should participate in the economy is a
multifaceted subject that is influenced by a number of factors, including the economic
system in place, societal values, and the unique challenges that each country faces.
Government intervention serves numerous important goals in a mixed-market economy
like the United States. By regulating industries and implementing antitrust laws, it can
assist alleviate the negative effects of market failures such as monopolies, externalities,
and information asymmetry. Governments can also play an important role in delivering
public goods such as infrastructure, education, and healthcare that the private sector
may underinvest in. Furthermore, fiscal and monetary policies can be utilized to stabilize
the economy during recessions or periods of inflation. However, the scope of
involvement should be carefully adjusted to find a balance between respecting
individual liberties, encouraging innovation, and sustaining economic efficiency.
Excessive government engagement can result in inefficiency, bureaucracy, and
unforeseen consequences.
Furthermore, if economic conditions change, the optimum level of government
intervention may change. In times of crisis, such as the global financial crash or a public
health disaster such as the COVID-19 epidemic, governments may need to intervene
more assertively to ensure stability and the well-being of citizens. Governments, on the
other hand, may minimize their participation during periods of strong economic growth
in order to allow market forces to flourish and stimulate innovation. Finally, the goal is to
maintain a fluid and adaptive approach to economic governance, always assessing
societal requirements and attempting to strike the correct balance between government
engagement and free market dynamics.