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A market intervention is a policy or measure that modifies or interferes with a market, typically done in the form of state action, but also by philanthropic and political-action groups. Market interventions can be done for a number of reasons, including as an attempt to correct market failures , [ 1 ] or more broadly to promote public ...
One such intervention is government regulation. [3] Others include taxes/subsidies and improvements to education/infrastructure. Public interest theory claims that government regulation can improve markets, compensating for imperfect competition, unbalanced market operation, missing markets and undesirable market outcomes. Regulation can ...
In October 2008, the Australian government made A$4 billion available to nonbank lenders unable to issue new loans. After discussion with the industry, this amount was increased to A$8 billion. In October 2008, the Swiss National Bank funded a reorganization of UBS that removed bad assets from its books, and later sold its equity stake at a profit.
The Secretary of the United States Treasury, Henry Paulson and President George W. Bush proposed legislation for the government to purchase up to US$700 billion of "troubled mortgage-related assets" from financial firms in hopes of improving confidence in the mortgage-backed securities markets and the financial firms participating in it. [9]
Public Economics focuses on when and to what degree the government should intervene in the economy to address market failures. [19] Some examples of government intervention are providing pure public goods such as defense, regulating negative externalities such as pollution and addressing imperfect market conditions such as asymmetric information.
Examples of government failure include regulatory capture and regulatory arbitrage. Government failure may arise because of unanticipated consequences of a government intervention, or because an inefficient outcome is more politically feasible than a Pareto improvement to it. Government failure can be on both the demand side and the supply side.
Simply put, it refers to government intervention. [ 3 ] In economics the "visible hand" is generally considered to be the macro-fiscal policy of John Keynes that emerged in the 1930s as a remedy for the shortcomings of Adam Smith 's " invisible hand " and advocated government intervention in the economy. [ 4 ]
For example, advocates of Real Business Cycle Theory [citation needed] argue that real shocks cause recessions and that the market responds efficiently to these real economic shocks. Krugman dismisses Say's law as, "at best, a useless tautology when individuals have the option of accumulating money rather than purchasing real goods and services".