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Posted on May 7th, 2014, by

Can there ever be a case when a government regulation is ďinefficientĒĚ?¬†¬†YES/NO?¬†¬†EXPLAIN WHY.

The government regulation may be inefficient, when the interference of the government in the regulation of economic policies has a negative impact on the market situation and performance of companies operating in the market. The government can introduce regulations that limit opportunities for business development that leads to the deterioration of the situation in the market. For instance, if the government raises taxes substantially for all taxpayers, this measure will definitely have a negative impact on the business development because the government regulation policy will depress the business development by its fiscal policies. In such a way, the government regulatory policy can be inefficient. More important, the government regulation can have a negative impact on the economic development. At the same time, the government cannot just stay aside of the economic development, because this may lead to the unstable economic situation. At this point, it is possible to refer to the example of the Great Depression, which occurred because of the uncontrollable market development and speculations, when the government just stood aside of the economic development of the country.

TRUE or FALSE? At any given moment, any government choice (to establish a new regulation/policy/law, to eliminate an existing regulation/policy/law, to keep and enforce an existing regulation/policy/law) distributes and/or redistributes wealth. EXPLAIN WHY.

True. In fact, the government regulation in the field of economy leads to the distribution or redistribution of wealth. At this point, it is important to place emphasis on the fact that the government a priori performs the function of the redistributors of the national wealth through the national budget. The government conducts economic policies to redistribute the national wealth. The government sets fiscal policies. Taxes provide the government with the budget to fund social programs and administration. At the same time, the government does not fund diverse projects spontaneously. In stark contrast, the government funds projects, which aim at the support of those in need, while tax payers are wealthy people or people, who can share their revenues with others by means of taxation. Therefore, the government redistributes the national wealth through its fiscal policies and economic regulation. Obviously, the government cannot take money from those, who do not have money. Instead, the government takes money from the rich and helps those, who do not have sufficient financial resources to cover their basic needs. This is why the government funds health care programs and public education, while the poorest citizen can count on the government support to receive basic health care services and education.

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