ECONOMIC FUNCTIONS OF GOVERNMENT

Objectives

Students will: Identify the six economic functions of

government Classify examples of government actions and

policies within various economic functions

Group Work Assessment Criteria (3p.) Helping others and listening to

others. Focusing on the task 1p. Use of English language 2p.

Presentation of Work Assessment Criteria (7p.)

Organization and presentation + answers (correctly) 6p.

Following the presentations of other groups. Asking questions. 1p.

ECONOMIC FUNCTIONS OF GOVERNMENT

1. Maintaining Legal Framework

2. Providing Public Goods and Services

3. Maintaining Competition

4. Redistributing Income

5. Correcting for Externalities

6. Stabilizing the Economy

1. Explain one of the six functions.

1. Maintaining Legal Framework 2. Providing Public Goods and Services3. Maintaining Competition4. Redistributing Income5. Correcting for Externalities6. Stabilizing the Economy

1. Maintaining Legal and Social FrameworkExample: Create laws and provide courts, provide information and services to help economy function better, establish a monetary system, define and enforce property rights.

2. Providing Public Goods and ServicesExample: Provide goods and services that markets are unable or unwilling to provide, such as national defense.

3. Maintaining CompetitionExample: Create and enforce antitrust laws; regulate natural monopolies.

4. Redistributing IncomeExample: Higher income tax rates for rich than for poor, provide social security, and aid to dependent children, Medicare.

5. Correcting for ExternalitiesExample: Taxes to reduce negative externalities, such as environmental pollution; subsidies to encourage positive externalities, such as education. Externalities exist when some of the costs or benefits associated with the production or consumption of a product "spill over" to third parties other than the direct producer or consumer of the product.

6. Stabilizing the EconomyExample: Use government budgets and/or the money supply to promote economic growth, control inflation, and reduce unemployment.

2. Classify each of the headlines under the appropriate economic function category.

(Some headlines may represent more then one function).

1. Municipality Government Approves Crime Bill; Cities to Hire Additional Police

2. Ministry of Health to Sue Tobacco Firms to Recover Health Care Costs

3. Government to Increase Aid to Education Next Year

4. Hughes Aircraft to Lay Off 4,400 and Close Big Defense Plant

5. Seimas Approves Higher Income Tax Rate for Top Wage Earners

6. Social Security Payments to Increase by 4% Next Year: Cost of Living Allowance Up

7. The European Commission has opened formal antitrust proceedings against the Lithuanian railway incumbent AB Lietuvos geležinkeliai ("LG")