SOLUTION: Grossmont College Role of Government in The Economy Essay

Attached. Please let me know if you have any questions or need revisions.Surname 1Student’s nameInstitutional affiliationInstructor’s nameDateRole of government in the economyWithout the government’s intervention, a country’s economy would crumble down toits feet; it is the responsibility of every government to protect its economy and solve societalproblems that may affect its economy. Through its policies and regulation, the governmentensures that there are economic stability and growth and regulation and control of theeconomy (Cobham 3). However, low government policies can also lead to a downfall in theeconomy and eventual shutdown. No government would love to watch their economy gosouth and do everything possible to ensure an upward trend. Therefore, it is evident that thegovernment means better than harm to the economy and always seek to protect it through itsvarious policies; it should therefore be allowed to do more towards the improvement of theeconomy.The government ensures economic growth and stability through fiscal policies. It alsoprovides regulation and control of the economy by applying monetary policies. Monetarypolicy will include all the activities that the central bank, government and other publicinstitutions partake in to regulate the flow of money in the economy. These policies can eitherbe expansionary policies to expand the economy or contractionary policies aimed atcontracting the economy. Money flow in the economy is essential since it can lead toeconomic growth or downfall. The government also has a role in the regulation of financialinstitutions in the economy. Policies that require banks to hold a minimum cash reserve atany given time to minimize failure, which can sabotage the economy.Surname 2An example is when the American government established the ‘too big to fail’ theory.The government suggested that some organization and corporations were too big to fail sincetheir failure would be disastrous. The approach told that the government would support thesecorporations if they faced potential failure (Barth and Wihlborg). The fiscal policy, which asister to the monetary policy, uses government tax and spending to control money supply anddemand. The actions under this policy can either be expansionary or contractionary.Expansionary measures are applied when the country is in recession; the government willresolve to increase its spending, decrease taxes, or increase the money supply in theeconomy. Reduction of taxes will lower the prices of goods in the economy and providehouseholds with dispos…

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