There are a number of views of the relationship between government and economics. For example, if economics is defined as "the management of scarce resources' then government plays the critical role as arbitrator of how to best distribute the resources to the greatest good of the citizens. This can be most clearly seen through the example of the flow of capital resources. In a capitalist economic system distribution of capital is critical to sustaining capitalism. In this respect, the relationship of the government to the economy is for the government to balance regulation of the capital producing organizations without interrupting the free flow of capital.
In a free market economy capital is allowed to flow in through the economy with the goal of maximization measured by increase of value (Think the stock market) of the capital. Capitalism by nature creates inequities and it is up to the government to decide how to best provide a safety net for those who are unable to compete and to regulate the economy to the betterment of the greatest number of citizens.
In a command economy, the government takes a much different role in the economy. In a command economy capital is not allowed to flow freely and without direction. The government controls capital and regulates the economy.
This relationship is dependent on the type of government, as well as the type of economy. For example, a capitalist government in a democratic government--such as the United States--plays a limited role in the economy. They favor a laissez-faire approach, meaning government officials opt to let the economy rise and fall as the market changes rather than implement overarching policies. Socialist governments prefer to have more influence on the economy, either by having certain market regulations, offering forms of welfare or social security, and implementing a variety of policies to influence the economy.
Government practices on every level affect the economy. Government maintenance of infrastructure, for example, affects businesses in nearly every field. If roads, bridges, buildings, etc. are causing delays or obstacles, this reduces productivity. Reduced productivity leads to less money in the pockets of employees. Less money means less sales and inflation.
The state of the economy also influences the government. In times of economic strife, there tend to be major changes in policy. Economic strife can even go so far a to lead a country in to war. An example of this is the French Revolution. An unequal distribution of wealth, a manipulative social hierarchy, and rampant poverty plunged France in to a civil war that shattered the balance of power in Europe.
This can be a very vague question in many ways. For this answer, I will use the United States as an example. The relationship between the government and the economy of a country is directly related. The government assumes the role of policymaker that directly and indirectly affects the economy of a country. For instance, the Federal Reserve, a government entity, sets interest rates and makes major financial decisions for the US. The government also uses policy to boost or slow down the economy. Moreover, political ideology and leadership influences the economy through tax rates.
To discuss guarantees from the government, we can use entitlement programs as an example. The United States welfare system is a guarantee backed by the government to help out struggling citizens. The more of these guarantees the government makes, the more socialized the economy becomes. Public schooling and roads are two guarantees the government provides, for instance. If the government did not provide such things, the private industry would fill the void. However, this requires government regulation to ensure fair play. This is the primary reason why the relationship between the government and the economy is necessary.
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