Economic Questions

1. The government’s influence on regulation within the economics of the United States is mostly done in the efforts to protect the general public and provide a market where competition can be made fair for all those that are in the same market.  One such area that the government’s influence has played a large role in the economic activity on both a domestic and global scale comes from the economic regulation seen in antitrust laws.  These laws are in place to “prohibit practices or mergers that would unduly limit competition,” (Beggs).  If two companies were to combine, either by a buyout or a merger and would control a dominant proportion of the market through their efforts, the government will step in and disallow that company from completing its transaction as the consequences would result in a single company possessing a monopoly in a particular market. 

This form of regulation has drawn both criticism and support from the general population.   Some feel that the government’s influence on such actions prohibits and hinders the general growth of the economy as it limits the idea of a free market.  Madison has this forethought on balancing federal power. Though this argument does have some truths behind it, the need for such influence is very important to protect smaller, less dominant companies within certain markets.  Without governmental regulation on the economy, the major markets would be dominated by extremely large companies that would effectively undercut the smaller players out and operate without any sort of competition ultimately eliminating the idea of a free market system. 

2. The increase in inflation will have an increasing effect on everyone’s lives, especially if it increases over time.  The most important, and short term, of these being that it will cost more money for the individual to maintain the same lifestyle that they have grown accustomed to living though their income will not rise at the same proportion.  As noted from the readings, inflation is defined as “the cost of living rising but the standard of living remaining the same,” and that the largest contributors to ones usual spending habits are housing (43%), automobile (17%), then food (15%).  Based on increasing inflation rates, the likely outcome felt by the individual is to have to make spending cuts to cover the essentials of spending.  Because housing and automobile expenditures cannot really be controlled, as they are set prices for the majority of people, the increased inflation rates will ultimately result in the a decrease in spending in the other areas of an individual’s usual spending habits resulting in a decrease in the standard of living to compensate for the inflation rate.

3.  Given the economic hardships that many have felt as of late, there appears to be one policy that would dramatically help in the efforts to promote economic growth within the nation, which is tax reform.  By “redesigning the tax and benefits system to increase labor activity rate and encourage work,” (Economics Online), the government would put into place a system that helps the individual that needs the most relief from giving back the money they have earned to the government.  Churches are already exempt from paying taxes. This sort of system could place a greater expectation upon individuals that are in the highest brackets of income as they have much more expendable income than those that are on the bottom brackets.  By providing relief to the low-class income earners of the nation, they would be able to take their extra money and place it back within the economy by making purchases that would, ultimately, build up the strength of the economy.  The major argument against this is that those with higher levels of income have to pay more than their fair share, which seems unfair; however, in terms of doing what is best for the economy as a whole, this sort of taxation system makes the most sense due largely in fact that it works as a “trickle-up” system where the lowest income earners are able to place their extra income back into the economy and boost its overall strength.    

Works Cited

Beggs, Jodi. "Regulation and Control in the U.S. Economy." About Economics. n.d. n. page. Web. 20 Mar. 2013. <http://economics.about.com/od/howtheuseconomyworks/a/regulation.htm>.

Economics Online. "Stability and Growth Policies." Economics Online. n.d. n. page. Web. 20 Mar. 2013. <http://www.economicsonline.co.uk/Global_economics/Policies_for_stability_and_growth.html>.