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The impacts are as follows:
Governments also intervene to minimize the damage caused by naturally occurring economic events. Recessions and inflation are part of the natural business cycle but can have a devastating effect on citizens. In these cases, governments intervene through subsidies and manipulation of the money supply to minimize the harsh impact of economic forces on its constituents.
Governments may also intervene in markets to promote general economic fairness . Government often try, through taxation and welfare programs, to reallocate financial resources from the wealthy to those that are most in need. Other examples of market intervention for socio-economic reasons include employment laws to protect certain segments of the population and the regulation of the manufacture of certain products to ensure the health and well-being of consumers.
- The government tries to combat market inequities through regulation, taxation, and subsidies.
- Governments may also intervene in markets to promote general economic fairness.
- Maximizing social welfare is one of the most common and best understood reasons for government intervention. Examples of this include breaking up monopolies and regulating negative externalities like pollution.
- Governments may sometimes intervene in markets to promote other goals, such as national unity and advancement.
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