The Government and the Economy
Although the government plays a smaller role in the U.S. economy than the governments of most other nations play in theirs, that role is important and multifaceted.
First, it is through the government that society produces goods and services that everyone needs but that markets can’t really deliver—defense is a good example. Second, total government spending accounts for about 28 percent of GDP, and that spending has a huge effect on the economy. Third, the government has the power to levy taxes, and the way in which it uses that power generates strong responses in people as well as in the economy. Finally, the government issues currency and controls the supply of money in the economy.
In this part, ...