What Role Does the Government Play?

Although producers and consumers make most economic decisions, the government is responsible for molding the economy, states About.com. The government guides the pace of economic activities by maintaining growth and price stability and promoting employment. Through its fiscal policy, the government adjusts tax rates and consumer spending. It also controls credit and the supply of money through its monetary policy. Furthermore, the government implements policies that control inflation and combat recessions.

The government’s regulations for businesses are designed to achieve fairness, transparency and openness to all parties, as noted by the Ministry of Trade and Industry Singapore. The government also ensures that there is fair competition in the economy. It also invests in education and training to provide professional and technical manpower for economic growth. In addition, the government invests in infrastructure, such as roads, communication networks and power grids, in order to lower the cost of business and to attract investors. It also funds human service programs, such as health care, to promote a productive society, notes the American Public Human Services Association.

The government also ensures that there is security and access to food in communities in order to promote social and economic well being of the society. Depressions, recessions and unemployment are the main challenges governments face in promoting economic growth, notes About.com.