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    The effects of government policy on economic behavior

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    What are the effects of government policy on economic behavior?

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    Government policy has a profound impact on behaviour of economy. Broadly one can have three kinds of policies:

    1. Capitalist system
    In a capitalist system businesspeople decide how to produce efficiently, guided by their desire to make a profit.

    2. A socialist system, price and production are determined by government.
    Thus in capitalism, "how to produce" is determined by business people's desire to minimize cost and maximize profits; in socialism, it is determined to a much greater degree by government. Hence ...

    Solution Summary

    The effects of government policy on economic behavior are articulated.