THE ROLE OF THE GOVERNMENT IN ECONOMY Government interfere the economic activities in the following aspects: 1.Public Goods ( 公共产品 )Public Goods ( 公共产品 ) 2.Externalities ( 外部效应 )Externalities ( 外部效应 ) 3.Monopoly ( 垄断 )Monopoly ( 垄断 ) 4.Incomplete Market ( 不完全市场 )Incomplete Market ( 不完全市场 ) 5.Incomplete Information ( 不完全信息 )Incomplete Information ( 不完全信息 ) 6.Unequal Distribution ( 分配不公平 )Unequal Distribution ( 分配不公平 ) 7.Macroeconomic disequilibrium ( 宏观经济总量失衡 )Macroeconomic disequilibrium ( 宏观经济总量失衡 )

Public Goods （公共产品） two characteristics of Public Goods. First, if one person consumes public goods, the amount available remains the same. Second, once public goods are available, no one can be stopped from consuming them for free. two characteristics of Public Goods. First, if one person consumes public goods, the amount available remains the same. Second, once public goods are available, no one can be stopped from consuming them for free. An example is the protection provided by police, fire departments, and the military. An example is the protection provided by police, fire departments, and the military. Government controls public goods and maintains them by its fund. Government controls public goods and maintains them by its fund.

Externalities （外部效应） Externalities — The side effect on an individual or entity due to the actions of another individual or entity. Externalities — The side effect on an individual or entity due to the actions of another individual or entity. Government imposes additional taxes on those industries which creates negative externalities Government imposes additional taxes on those industries which creates negative externalities Government also promulgates some laws to restrain the industries to pollute the environment. Government also promulgates some laws to restrain the industries to pollute the environment.

Monopoly （垄断） This goes against the fair competition. Government must interfere in monopoly. Like the case of Microsoft. This goes against the fair competition. Government must interfere in monopoly. Like the case of Microsoft.

Incomplete Market （不完全市场） Nothing is perfect, so as market. Government has to guide the market to the right way and perfect the market system. Nothing is perfect, so as market. Government has to guide the market to the right way and perfect the market system.

Incomplete Information （不完全信息） Some buyers may not know the precise price of a product. The unbalance of information between sellers and buyers causes unfair exchange. Some buyers may not know the precise price of a product. The unbalance of information between sellers and buyers causes unfair exchange. government must provide useful and low-cost information to the market participators and guides the social distribution correctly. government must provide useful and low-cost information to the market participators and guides the social distribution correctly.

Unequal Distribution （分配不公平） Some people earn more, while some people earn less, and some people ’ s earning is not related to their contribution. Some people earn more, while some people earn less, and some people ’ s earning is not related to their contribution. Government would compose progressive income tax （累进所得税） and provide subsidies to the poor people to adjust this unbalance. Government would compose progressive income tax （累进所得税） and provide subsidies to the poor people to adjust this unbalance.

Macroeconomic disequilibrium （宏 观经济总量失衡） The unbalance of supply and demand gives birth to inefficiency in resource distribution. The unbalance of supply and demand gives birth to inefficiency in resource distribution. In the situation of inflation, government should apply constrictive monetary policy （紧缩的货 币政策）, decreasing the currency in the market, while in the period of depression, use expansive financial policy （扩张的财政政策）, increasing governmental investment. In the situation of inflation, government should apply constrictive monetary policy （紧缩的货 币政策）, decreasing the currency in the market, while in the period of depression, use expansive financial policy （扩张的财政政策）, increasing governmental investment.

Tax Tax Loan : Treasure notes （中期国库券）,Treasure bonds （长期国库券）, Treasure bills （短期国库券） & oversea borrowing Loan : Treasure notes （中期国库券）,Treasure bonds （长期国库券）, Treasure bills （短期国库券） & oversea borrowing Income of government: fine （ penal money ）, income from the governmental investment. Income of government: fine （ penal money ）, income from the governmental investment. How does UK government spend this money? How does UK government spend this money? How does UK government spend this money? How does UK government spend this money? THE FUNDS OF GOVERNMENT Income Tax Corporation Tax VAT （ Value Added Tax ) Excise

Thank You END 蔡健智