Role of government in developing economies
As with many issues pertaining to globalization, concerns and hopes about international investment revolve in many ways around what governments may do. This means both what governments may do to regulate foreign investment, perhaps to make it less volatile, as well as actions government may take simply to get out of the way of the market, clearing the existing barriers to capital. Every government has got some aims to maintain the rate of GDP ( gross domestic product) that having a stable economy. Here are some common aims of government which everyone country has to take care of :
Keep inflation under control
Inflation creates uncertainty and results in the fall in the value of money in terms of goods and services. Inflation also creates uncertainty. Therefore, the governments use macroeconomic policy instruments to keep inflation under control.
Maintain a high level of employment
High unemployment is bad for the economy. Unemployment means resources are not being utilized properly. Therefore governments take measures to increase employment.
Economic Growth
If economy grows, people can enjoy higher standards of living. Therefore it is always an important aim of government policies.
Redistribution of income
The market system sometimes allows the rich people to become richer and the poor people to become poorer. When the gap between the rich and the poor widens, the national indicators no longer reflect the situation of the average individuals.
Maintaining a healthy balance of payment
Balance of payment is the difference between a country’s exports and imports. If increases in incomes result in increases in imports while there is no equivalent increases in export revenue, it will result in the balance of payment deficit. a sustained balance of payment deficit for many years will lead to the country to become indebted to the rest of the world.
Demand-side policies: Macroeconomic policies undertaken by a government aimed at increasing or decreasing
Keep inflation under control
Inflation creates uncertainty and results in the fall in the value of money in terms of goods and services. Inflation also creates uncertainty. Therefore, the governments use macroeconomic policy instruments to keep inflation under control.
Maintain a high level of employment
High unemployment is bad for the economy. Unemployment means resources are not being utilized properly. Therefore governments take measures to increase employment.
Economic Growth
If economy grows, people can enjoy higher standards of living. Therefore it is always an important aim of government policies.
Redistribution of income
The market system sometimes allows the rich people to become richer and the poor people to become poorer. When the gap between the rich and the poor widens, the national indicators no longer reflect the situation of the average individuals.
Maintaining a healthy balance of payment
Balance of payment is the difference between a country’s exports and imports. If increases in incomes result in increases in imports while there is no equivalent increases in export revenue, it will result in the balance of payment deficit. a sustained balance of payment deficit for many years will lead to the country to become indebted to the rest of the world.
Demand-side policies: Macroeconomic policies undertaken by a government aimed at increasing or decreasing