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The Role of Government

As we have learned, the U.S. economy is a market economy. It relies on the free market to determine what goods and services should be produced, how they should be produced, and who will receive them. The government does not make these decisions. However, the government does play a part in market economies.

Let's think about some of the ways the U.S. government participates in the economy.

The government:

  • Protects the market system
  • Supplies goods and services (for example: building roads, providing electricity and natural gas, providing schools for education)
  • Corrects issues that may harm the public, such as pollution
  • Redistributes wealth and income
  • Sets and collects taxes
  • Redistributes resources
  • Stabilizes the economy 

The government does not dictate production or distribution for businesses or work to protect them. Its focus is to protect its citizens—the consumers.