Please quickly Im taking the exam now.- What are the four reason.pdf

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There are four main reasons for government intervention in the economy: 1) establishing equity, 2) addressing externalities, 3) managing macroeconomic instability, and 4) providing public goods. Two of these in more detail are macroeconomic stabilization, like stimulus packages during recessions, and public goods, which private sectors are unwilling to invest in due to high positive externalities.

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Please quickly I'm taking the exam now.
- What are the four reasons or justifications for government interventionin the economy?
Describe two in details, providing an example of eash.
Solution
Govt intervention is required due to following reasons:
1. Establishing equity based society
2. Presence of negative and positive externalities
3. Macro economic instabilities
4. Making Public goods available
Detailed Discription:
1. Macro economic stablisation: Present days economic system is subject to fluctuation due to
inflation and recession. Recession is matter of worry where the unemployment issue comes to
fore. here private system doesn ot work efficienty and cringe from investing in the economic
activities. here govt can interven in the system by making huge stimuls package by investing in
varied economic activites. The recent recession in the USA is an example of this where the govt
released stimulus packages to deal with problem of recession.
2. Public goods: Public goods such as the road and transportation can not be left to the private
sector. Private sector is quite unattentative to invest in public goods. These goods have high
positive externalites and are not supposed to provide direct benefits. Hence govt must provide
these goods.

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