Ready to test your Knowledge?
Try out our new practice tests completely free!
exam preparation banner icon

Macroeconomics Study Set 43

Business

Quiz 5 :

A: Governments Role and Government Failure

Quiz 5 :

A: Governments Role and Government Failure

search
arrow
Does big government equal bad government? Discuss?
Free
Essay
Answer:

Answer:

Since economics is focused on efficiency, you might wonder where economists stand on the subject.
The answer is that economists focus not on bigness or smallness per se, but on marginal benefits (MB) and marginal costs (MC).Spending should be increased up to the point where MB = MC.For some programs that will be a small dollar amount.For other programs that will be a large dollar amount.
Thus, economists don't see much point in having an abstract debate over Big versus Little Government.What matters is allocative and productive efficiency and directing government's limited resources toward the programs that generate the largest net benefits for society.
From that vantage point, we should not condemn large government programs just for being large.We must first compare MB with MC.Only if MB < MC should large programs be reduced or eliminated.