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Economic and government consist major role for the every enterprise. In respect to this, major functions play by government in market economies. In addition to this, government provide legal and social frameworks through they can support the country (Hirst, 2013). In addition to this, economy play functions such as maintain competition, provide public goods and services, correct for externalities and stabilize in the economy. In this context, report covers tools that are available to government to manage the economy. Furthermore, report describe main types of market failure that are likely to prevent housing market from operating efficiency. Moreover, it also includes assessment criteria which help to understanding microeconomic concepts and application to economic policy. At last, it includes excellent discussion of key macroeconomic consideration for the policy frameworks under consideration.
In order to manage the economy, government has various tools and techniques through they can enhance GDP of the country (Von Mises, 2013). In this context, below are the tools and techniques includes which can be used by the government:
Government spending: Government spendings includes purchase of goods and services through they can achieve more revenue. In this term includes fiscal policy tool because it helps to raise GDP of the nation. Through adjusting government spendings, they can influence to the country economic. As results, it can be generate primary effect on the economy of the nation (Corsetti, Meier & Müller, 2012).
Taxes: Taxes are also tools for fiscal policy, which affect to middle level of customers. In respect to this, by adjusting taxes government can influence in economic output of the country. In this context, government generate taxes through business and profession. In respect to this, they can generate marginal tax rates which can be raised or lowered.
Transfer payment: Transfer payments includes things like social security and welfare of public (Bellucci & De Angelis, 2013). In this context, government can spend their money for the country benefits. In respect to this, they can provide free services for country operations. In this, they can provide employment to the people, adjustment of food for poor people. Additionally, they can serve products and services which need to fulfil by business for enhance economic conditions.
Market failure is a situation in which business fail to allocate their resources efficiently (Bolgherini, S. 2014). In respect to this, economists identify following circumstances to failing of market:
Productivity and allocative in efficiency: When organization have not proper tools and techniques, they are fail to produce more goods and services within the business. In respect to this, it is very essential to prevent it because it creates majors impact on the scare resources in the most efficient way (Bisin, Lizzeri & Yariv, 2015).
Monopoly power: Market can be also fail to control monopoly buyer. This is because, it can make negative impact on the business operations.
Missing markets: Market can be fail to form and produce results to meet of the public requirements. This is because, organization fail many times due to lack of street light, defence and main road (Calderón & Fuentes, 2013).
De-merit goods: Market may also fail to control the manufacture and sale of goods which are prevented by government. Fore example, cigarettes and alcohol which have less merit than consumer perceive (Beckmann, Endrichs & Schweickert, 2016).
From the research it can be found that there are four key areas for determining value of each selection criterion. In respect to this includes followings:
Consequence of failure: Decision makers demonstrate that how failure from unqualified behaviour would be relation to select criterion. The consequence of failure can be take into such things as injury to people, damage to property or equipments and legal liability, etc. (Martin & Vanberg, 2013).
Relative importance: Decision makers familiar with the input and output of role which consisting in the environment. In respect to this, the highest priority which is most important criterion.
Time to achieve competence: To achieve some special criterion there are various orientation that will be helpful to gaining specific knowledge, skills and experience that contribute to the effectiveness in a role (Dao, 2014).
There are different types of microeconomic concepts which create major impact on the business outcomes. In respect to this, following are the microeconomic concept explains and demonstrate their impact:
Benefit-cost-analysis: According to this concept, every business can make their own decisions regarding objectives. In this context, government introduced opportunities cost, scarcity, incentives and other things (Corsetti, Meier & Müller, 2012). In respect to this, economic theory must be beneficial which can be constructed by analysis. It creates positive impact on the business operations which formulate rules for long-term interest.
Division of labour and specialization: According to this concept, organization need to determine division of responsibilities and specialization according to qualifications of employees. In respect to this, it is applied by human efforts, intelligent and practices which create successful operations of the country (Hirst, 2013). It also helps to improve productive powers through people assume wealth part of the country.
Marco economic consideration consist major role in the country which demonstrate by the government. It also defines as branch of the economic analysis which contribute study of aggregates. In this context, it covers theory of income, output and employment which make investment functions and business cycle (Von Mises, 2013). In respect to this following elements can be considered for the macroeconomic consideration:
Economic growth: An increasing in economic activity, economic growth can be measure through business development. In respect to this, negative growth is associated with economic recession and economic depression.
Gross domestic product: Total value of input and output in a year by domestic residents of the nation. In respect to this, country earn more profits and they can invest money in different part of the world (Beckmann, Endrichs & Schweickert, 2016).
National income: National income consist total value of final goods and services which produced by national country for a particular period.
Capital: Manufactured goods has been used in production process including tools and techniques. In addition to this, it also covers equipments and machinery that will demonstrate various things in country.
Comparative advantage: Macro economic factors also connect with comparative advantages of the enterprise. In this context, production cost can be affect to the nation when they selling products and services in various parts of the nation. In this context, country has opportunity to make lower cost in another nation (Corsetti, Meier & Müller, 2012).
Allocative efficiency: Allocative efficiency can be generate in output, which state of the economy in which production reflects consumers preference in particular way. In this every good and services is produced by the business through they can make effective participation in the country (Dao, 2014).
In order to frame the policy following policies can be taken by the government which can be considered in macroeconomic:
All problem of the economy will be control by the government which contribute different types of policy. In this context, everyone can remove problems from the workplace through adopting these policies. In respect to this, following are the policies can be considered by government which contribute major role in the enterprise:
Monetary policy: Monetary policy is a tool that used by the national government to influence the economy (Corsetti, Meier & Müller, 2012). In this context, they can control the supply of money throughout the nation. Additionally, government attempts to influence the overall level of economic activity in line with the objectives. In this context, mainly goals are included such as low employment, low inflation, economic growth and balance of payment.
Fiscal policy: Fiscal policy refers as expenditure of government which undertake to offer goods and services through a way which government make finance on these expenditures. It can be generate through taxes and government expenditure (Beckmann, Endrichs & Schweickert, 2016).
From the above report it can be concluded that government play major role in which they contribute their effective participation in various part of the country. In respect to this government has different tools and techniques through they can attract customers of different part of the country easily. In respect to this, they can easily manage their economic through generating taxes and achieve other revenue for the nation. Furthermore, it also covered different types of market failure in which they contribute monopoly power, missing market and de-merit goods. In addition to this, it also included key underlying microeconomic concepts such as cost benefits analysis and division of labour specialization. It will demonstrate various things in the businesses. At last, it covered macroeconomic consideration through government frame policy towards the business operations.
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