State Intervention in Mixed Economies: Correcting Market Failures
Role of the State in Mixed Economic Systems
Economic systems predominantly feature a mixed economy, combining the market’s advantages in seeking efficiency with the state’s greater concern for equity.
From Guardian to Active State Actor
Government intervention is always present in the functioning of market economies, though its degree of importance has changed over time. While the nineteenth century emphasized economic liberalism in favor of non-state intervention, three persistent issues remained:
Read MoreCapitalism: Defining Features and Keynesian Policy Impact
Understanding Capitalism: Core Features
Defining Capitalism
The capitalist economic system, or simply capitalism, is an economic system where private actors (individuals) have the right to own property and control its use in line with their specific interests. A pricing mechanism regulates demand and supply in the markets, ideally serving the interest of society at large. Under this system, there is minimal intervention by government and authorities on how markets operate. In a nutshell, it is an
Read MoreBusiness Operations and Financial Management
Business Operations
Operations cover the annual functions of your business. Evaluate each step to develop a manual, and limit operations to key issues.
Operations Include:
- Facilities
- Product planning and inventory control
- Supply and distribution
- Order fulfillment and customer service
- Financial control
- Contingency planning
Facilities Considerations
The facilities considerations of the operations plan include the type of location and access to facilities.
Production Planning
Production planning takes into account:
Read MoreMarket Failures: Government Solutions & Economic Interventions
Market Failures and State Intervention
Market failures often necessitate state intervention to achieve economic efficiency and social welfare.
Understanding Externalities
Externality: Occurs when the production or consumption of goods directly affects consumers or businesses not participating in the purchase or sale, and when those effects are not entirely reflected in market prices.
Externalities may be associated with either production or consumption and can be positive or negative.
Negative Externalities
Read MoreKey Concepts in Economics: Markets, GDP, Inflation & Employment
Market Structures & Competition
Perfect Competition Markets
Goods and services are exchanged voluntarily at a price fixed by the market as a result of the free operation of the laws of supply and demand. In this situation, not a single company has enough power to influence the price, so all companies compete on equal conditions.
Imperfect Competition Markets
One or more companies have the power to influence price, to a greater or lesser extent. The smaller the number of companies, the greater their
Read MoreEssential Macroeconomic Concepts & Federal Reserve Insights
Real GDP Decrease (2007-2008): Production Levels
When real GDP decreases from 2007 to 2008, we can conclude that production levels are lower in 2008.
Who Changes Money Supply?
The Federal Reserve can change the quantity of money in the economy.
Annual Budget Decision-Makers
The annual budget is decided upon by the President of the United States and the United States Congress.
Federal Reserve Board Structure (FOMC)
The Board of Governors of the Federal Reserve (FOMC) is a seven-member board, with each member
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