So, it was obvious to virtually everyone that coming out of the pandemic we were going to experience accelerated demand. Biden’s request for talks followed a jarring new projection from the Treasury Department that the government could run out of cash to pay its bills in as few as four weeks without additional. But pandemic restrictions made it impossible for them to spend at traditional levels. ![]() This made sense under the circumstances as people were unable to work and needed to pay their bills. This section deals with how governments can intervene in product markets to ensure markets are efficient and that consumers, employees and suppliers are not. Problems arise when the government intervenes.ĭuring the pandemic, the government intervened big time by approving $4.1 trillion in relief measures under President Donald Trump. The UK and US have intervened in the race to develop ever more powerful artificial intelligence technology, as the British competition watchdog launched a review of the sector and the White House. Antitrust laws are designed to promote competition and prevent monopolies. The goal is to keep supply and demand in balance and our free market economy naturally trends towards that balance (which was the case during the Trump administration). Antitrust laws are another tool the government uses to interfere with big business. Protectionism refers to national economic policies. When the supply of a particular good is greater than the demand, retailers will lower their prices increasing demand. Protectionism is perhaps the leading manifestation of government intervention in international business. ![]() Without government regulation of business, smaller players would be squeezed out of the market, leading to the monopolies that could exploit the buyer. For example, if the demand for a particular retail good is high, but the supply of that good is low, retailers will increase prices resulting in reduced demand. In reality, government interferes with business constantly through taxes, subsidies, tax breaks and legal regulations. Government involvement in the economy increased most significantly during the New Deal of the 1930s. In normal economic times, the markets balance supply and demand minimizing inflation. While there are many moving pieces in any economy, the root causes of inflation are relatively straightforward.
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