1. Economic Functions of Government Q: What is the Government’s Role? A: Set the Rules of the Game…

2. Maintaining Legal and Social Framework Example: Create laws and provide courts, provide information and services to help economy function better, establish a monetary system, define and enforce property rights. Framework only!

3. Eminent Domain (Kelo v. New London)

4. Eminent Domain

5. Providing Public Goods & Services Example: Provide goods and services that markets are unable or unwilling to provide, such as national defense. Roads, Parks, Schools… Providing for Market Failures

6. Public Goods

7. Maintaining Competition Example: Create and enforce antitrust laws; regulate natural monopolies. Block Mergers that lessen competitive markets— prohibit collusion…

8. Maintaining Competition

9. Redistributing Income Example: Higher income tax rates for rich than for poor, provide social security, and aid to dependent children, welfare, Medicare, Medicaid-- Controversial!!

10. Kids economic future

11. Future of Social Security?

12. Correcting for Externalities Externalities: negative or positive economic side effect. Implicit or explicit costs that spill over on other people or firms Ex: Taxes to reduce negative externalities: such as penalties for environmental pollution; subsidies to encourage positive externalities, such as scholarships.

13. Correcting for - Externalities

14. Stabilizing the Economy Example: Congressional budgets & spending and the money supply to promote economic growth, control inflation, and reduce unemployment. Actions of the Federal Reserve & Bernake. Raise or lower interest rates or money supply

15. Greenspan in Retirement

16. National Debt

17. Last function—Spend YOUR $