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For example, the government makes laws and regulations concerning product safety.

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Net Neutrality - Bill of Rights Institute

Why do governments regulate the prices in industries such as natural gas and electricity
Most economists and many politicians did not believe that would happen, but the tax cuts were politically popular.

In fact, the tax cuts resulted in very large budget deficits because the government did not collect enough taxes to cover its expenditures.

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In addition, most voters are not well informed on complicated matters of economic policy.

For example, the federal government’s budget director David Stockman and other officials in the administration of President Reagan proposed cuts in income tax rates.


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This lack of clear signals also makes it difficult for the government to determine a policy that will correct the problem.

Political influences, rather than purely economic factors, often play a major role in inefficient government policies.

One is simply that the government is expected to deal with some of the most difficult problems facing the economy, taking over where markets fail because consumers or producers are not providing clear signals about what they want.


In such periods, the severity of the situation builds more consensus about what should be done, and makes it more likely that the problem will still be there to deal with by the time the changes in government spending or tax programs take effect.

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After that, it takes more time for the changes in spending or taxes to have an effect on the economy.

When there is only moderate inflation or unemployment, it becomes harder to reach agreement about the need for the government to change spending or taxes.

United States Economy - The Role of the Government

These policies increase total spending in the economy, encouraging more production and employment.

Some government spending and tax policies work in ways that automatically stabilize the economy.

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Specifically, if inflation is too high because consumers, businesses, and the government are trying to buy more goods and services than it is possible to produce at that time, the government can reduce total spending in the economy by reducing its own spending.

Political positions of the American political parties

In addition to the monetary policies of the Federal Reserve System, the federal government can also use its taxing and spending policies, or fiscal policies, to counteract inflation or the cyclical unemployment that results from too much or too little total spending in the economy.