Ex.20. Answer the following questions. Refer to the text if needed

Ex.19. Read the text. Choose the best sentence A-G to fill in each of the gaps 1-7. Do not use any letter more than once. There is an example at the beginning.

0 There are several reasons that economists have identified.

A Another example of externalities but in the form of external benefits is public education.

B Then, with less money in the economy to spend and higher interest rates, both spending and prices will tend to fall, or at least increase less quickly.

C This kind of good is called a public good because no private business could sell such goods and services to citizens of a nation and stay in business.

D Over the last 40 years these social programs have been rapidly growing parts of government spending and taxation programs in most industrialized economies.

E By intervening, government can force the producers and consumers of the product to pay the cleanup costs. In essence, this economic role of government is simply to make those who enjoy the benefits of selling and consuming a product pay all of the costs of producing and consuming it.

F Without such assurances, few people are going to risk their time and money in enterprises whose rewards may possibly go to the state or some other group.

G One such role is to provide a widely accepted, stable currency that eliminates the need for cumbersome and inefficient systems of barter, and to maintain the value of that currency through policies that limit inflation (an increase in the overall level of prices of goods and services).

1. Why are private companies unable to provide such public services as national defense?

2. What are externalities?

3. Providing examples, explain the difference between external costs and external benefits.

4. What is intellectual property? How can it be protected by the government?

5. What is a social safety net?

6. Supporters of wealth redistribution argue that this role of government limits the concentration of wealth and maintains a wider diffusion of economic power among households. Those who oppose major redistribution programs counter that additional taxes on high-income families decrease the incentives of these groups to work, save, and invest, which adversely affects the overall economy. Which opinion do you support?

7. What policies does the government use to stabilize the economy in periods of inflation and unemployment?

8. There is one more role of governments in market economies not discussed in the above text, namely maintaining an effective degree of competition in the economic system. Explain how this can be done.

TEXT C: INVISIBLE HAND

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