Households and Government: Roles and Influence in the Economy

Households - Households are groups of individuals living together making joint decisions - Households supply the labor with which businesses produce and government governs - The largest source of household income is wages and salaries - In the economy, households vote with their dollars to determine what businesses produce - Besides being suppliers of labor, households make a significant number of the decisions in The economy Government - The government plays two general roles in the economy - An actor who collects money in taxes and spends that money on projects, such as Defense and education - A referee who sets the rules that determine relations between businesses and Households Government as an Actor - The United States has a federal government system, which means we have various levels Of government, each with its own powers - Together all levels of government consume about 15% of the country’s total output and Employ over 22 million individuals. - The state and local levels of government employ 19 million people and spend about $2.5 trillion a year Government as a Referee - Government sets the rules which regulate the interactions between households and

Businesses Six Roles of a Government in a Market - These roles include 1. Providing a stable set of institutions and rules 2. Promoting effective and workable competition 3. Correcting for externalities 4. Ensuring economic stability and growth 5. Providing public goods 6. Adjusting for undesirable market results