Macroeconomics View On The Government Involvement In The Economy - 1650 Words

Macroeconomics: View On The Government Involvement In The Economy (Other (Not Listed) Sample) Content: Student’s Name Professor’s Name Course Date Macroeconomics Macroeconomics is an analysis of the economy by considering factors of the internal and external environment. Various scholars including Maynard Keynes and Hayek F. A, advance the concept of macroeconomics. These well-renowned economists provide divergent views on the ways of dealing with economic problems. They base their arguments on different ideologies including the involvement of the government in the economy, as well as the influences developed by the government involvement in economic activities. This analysis focuses on the concept outlined by economists, as well as their inferences on the government’s role in the minimum wage. View on the government involvement in the economy The actions involving government interference in economic activities has both positive and negative effects. Government involvement in economic activities can involve ways such as the subsidization of the prices of goods and services and provision of incentives to the local industries. These involvement techniques take on various effects to both the consumers and the sellers. As posited by F.A Hayek, government involvement in the economy, as well as economic activities, has very little influence on the economy. Hayek believes that the government activities have less noticeable effects on the economy, as the economy operates under its policies (Kirzner 226). He considers the economy as a separate entity, which cannot be influenced by interactions with the government, but rather by the market forces of demand and supply. Keynes, on the other hand, provides that the government can influence the economy through various activities. Keynes provides that through the invisible hand, the government control factors of the economy. This behavior aims at protecting the consumer and protecting local industries. Additionally, Keynes provides that the government create a conducive environment that encourages an increase in the demand trends by consumers. Strategy to deal with recession or depression The recession is a situation that arises due to the fall in the revenue for the government. In this situation, the economy experiences a deficit in the money supply, where the available funds in circulation are less compared to the expenditure rate. Both Hayek and Keynes have differing ideologies of dealing with this situation. Hayek believes that the economy corrects itself, to achieve sustainability (Kirzner 227). According to him, people should suffer under the situation, which will encourage them to participate in economic activities to help them improve their lives. This will have a resultant effect of a stable economy. Keynes believes that during the recession, the government needs to intervene to improve the economy. The government can employ techniques such as increasing its expenditure and reduce the taxes. This will increase the money supply in the economy, thus contributing to the stability of the business. Risks associated with government intervention Hayek presents a more relaxed approach when exploring the activities and trends in the economy. He believes that too much government involvement or also, little of it does not influence the individuals. He, therefore, presents that individuals are solely responsible for their decisions and that their choices have consequential effects on the various effects it causes on their economic status. Keynes theory focuses on the involvement of the government in the economy, to increase stability and encourage growth. To him, less government involvement affects various factors of the economy including the national debt. He portrays that too much government spending can cause an increase in the national debt. He perceives that the government borrows funds to finance its economic activities and if the spending is too much, the national debt will continue to rise. Economic Policy Economic policies involve the economic endeavors taken by the country to solve a particular issue in the economy. For instance, the country can decide to create possible means of raising the minimum wage of its citizens. The policy can incorporate the means of minimizing the unemployment rates in the country (Levin-Waldman 99). This policy is influential as the government seeks to increase the minimum wage by encouraging full employment. As the government seeks to achieve this objective, it needs to involve itself in the economy and take part in the economic processes. Therefore, this behavior is attributed to the concept developed by Keynes, who provides that the government can control activities of the economy by taking part in the economic activities of the nation (Jahan, et al., 64). Thus, this policy is built on the theory developed by Keynes. The policy influences various aspect of personal satisfaction. The current wage rate attained from the businesses is only enough to help them meet their necessities. Businesses provide minimal instances of excess income, resulting in healthy expenditure behaviors. This policy seeks to identify the various easy of interacting and improving the minimum wage to increase income gained by individuals (Dietrich 61). This will increase the spending habits, thus increasing satisfaction in individuals. In my view, I believe that an increase in the minimum wage rate influences the behavior of a person to purchase. It will also improve the economic status of individuals, which ...