The Pros And Cons Of Having A Mixed Economy

. Having a mixed economy is the ideal economic system for a country. Privatization would facilitate the idea of having a mixed economy, but nevertheless, the government should have some rules and regulations, more like Laissez-faire. Laissez-faire is the idea that the government should leave decisions the market and according to Adam Smith, the government's interference should be limited to public health, national defense, etc (Samuelson &Nordhaus, 2010). By having that, there will be efficiency, equity, and economic growth. Governments would interfere in the market to enhance efficiency by encouraging competition, reducing externalities, and offering public goods (Samuelson & Nordhaus, 2010). Governments would encourage competition by reducing …show more content…
By having the two concepts of fiscal policies and monetary policies, a government can control growth of a country. According to Samuelson and Nordhaus (2010), "Fiscal policies involve the government's power to tax and the power to spend. Monetary policies involve determining the supply of money and interest rates." Governments intervene to solve high unemployment rates, high inflation rates, and slow economic growth, using the monetary and fiscal policies. Concerning fiscal policies, having the government decrease taxes, or increase the public's spending, like public health, building roads, etc will. "Lower taxes increase disposable income and therefore help to increase consumption, leading to higher aggregate demand" (Pettinger, 2011). With that happening, there will be more job opportunities available, leading to the decrease of unemployment rates. Regarding monetary policies, the government could decrease the interest rate. Pettinger (2011) states, "Lower rates decrease the cost of borrowing and encourage people to spend and invest." Having the government intervene in the market to do that will cause the country to grow and stabilize the country. Therefore, government intervention in the market is