1.

Governments impact on the local economy-

a. Local areas might be dependant on state owned industries where in the
government will make decisions on how much to produce and wages which is
needed to be paid directly affecting the community

Lesser supply but higher demand — Increase in prices

Greater supply but no demand /or low demand – Reduction in prices

State owned industries work for the welfare of the community and do not aim on
maximising profits hence this can be affordable for locals . However private
sectors firms aim on increase profit, growth , marketshare and revenue hence
can increase their prices targeting people with higher income to be their
potential consumers .Therefore the government can provided subsidies to such
firms . Subsidies are grants by the government for encouraging consumption and
production of good . This can induce a reduction in the cost of production leading
to economies of scale incentivising firm to expand hence increase employment .
This may increase the purchasing power of the locals increasing demand , hence
creating scarcity so supply will increase , increasing the output and GDP which
can lead to demand -pull inflation and also lead to higher standard of living and
quality of life .

Local government is a government organization with the authority to administer

a range of policies within an area of a country. So this local government may
provide a range of goods and services including housing and infrastructure . To
finance these projects the local government may increase taxes (indirect and
corporation) and receive grants from the national government . Such activities
of building infrastructure may increase geographical mobility among workers
increasing chances for them to earn higher income by joining a larger firm or
increase number of children willing to come to school . Building housing and firms
can be a supply side policy as well as generates a greater social benefit that cost
.

2. Governments as a producer -
b. A government may become a producer to produce products which it believes is
of a great importance, essential to be provided to all and those which the private
sector may underproduce or not produce . A government may also produce
essential products such as housing and merit goods or goods with free rider
problem . Most countries seek to ensure that their key industries survive and do
well . Strategic industries are the industries that are important for the economic
development of the country .These firms might make up a greater proportion of
the country’s gross domestic product and national champions are industries that
are , or have the potential to be world leaders For such firms ancillary industries
might be set up to reduce transportation cost as well as increased convenience
this is because they seek their strategic industries and national champions to do
well.
 3. Governments as an employer -
c. The government employees workers and managers to operate its state-owned
enterprise. Employing people helps a government to achieve some aims and to
reduce unemployment the government may employ worker. To control rise in
prices the government can limit wage rise and set laws for good quality training
,preventing discrimination and ensuring good pensions .This can be due to the
government trying to reduce demand - pull inflation hence limiting wages
increase to reduce the purchasing power and the overall demand moreover the
government is also trying to limit cost push inflation by increasing business costs
to follow these employment practices which can reduce the profitability of these
businesses making it difficult for them to increase wages .

4. Governments at an international level -

For globalisation Against globalisation

● Promote free international trade -
so that country can benefit from
higher consumer choice and also
greater exports can reduce the
current account deficit moreover
can also increase the job
opportunities.. Moreover,
international trade can enhance
diplomatic relations and promote
peace by fostering mutual
interdependence among nations.
● Overall, promoting international
trade can contribute to economic
prosperity, job creation, and
improved standards of living for
the citizens of participating
countries.
● By engaging in trade with other
nations, countries can access a
broader market for their goods
and services, leading to increased
sales and profits for domestic
industries.
● Trade restrictions made be placed - By imposing tariffs,
quotas, or embargoes, governments can artificially inflate
the prices of imported goods, making them less attractive to
consumers compared to domestically produced alternatives.
● Governments aim to shield domestic producers from foreign
competition, prevent dumping of cheap goods which can
drive out domestic markets , and ensure fair trade practices.
● Some countries may restrict the importation of goods that
fail to meet their environmental or health standards, such as
products containing hazardous chemicals or genetically
modified organisms. By imposing such restrictions,
governments aim to protect their citizens and environment
from potential harm while promoting higher standards of
production and sustainability domestically.
● This creates an incentive for domestic producers to increase
their output to meet the demand previously met by
imports.trade restrictions can be accompanied by supportive
government policies aimed at fostering the growth of
domestic industries, such as targeted subsidies, tax
incentives, and regulatory reforms.
● These complementary measures can further encourage
production by domestic markets by reducing the costs of
doing business, promoting innovation and technology
adoption, and providing financial support to industries
facing transition challenges.
● MNCs adhere to high ethical and
corporate social responsibility
standards, contribute positively to
local economies through job
creation and technology transfer,
and engage in sustainable
business practices that respect
human rights and environmental
sustainability. In such cases,
governments may welcome MNC
investment as a source of
economic growth, innovation, and
international trade.
● MNCs can sometimes be perceived as a threat to local
businesses, particularly small and medium-sized enterprises
(SMEs). MNCs often have significant financial resources,
advanced technology, and economies of scale that allow
them to outcompete domestic companies, leading to market
dominance and potential monopolistic behavior. This can
stifle competition, limit consumer choice, and concentrate
wealth in the hands of a few multinational entities
● MNCs may face scrutiny for their labor practices,
environmental impact, and contribution to social inequality.
Concerns may arise about MNCs exploiting cheap labor in
host countries, disregarding labor rights and environmental
regulations, and contributing to social dislocation

1. Trade bloc is a regional group of countries that remove trade restrictions between
themselves.
2. Free international trade is the exchange of goods and services between countries
without any restrictions .