0.2 Case Study: Government Intervention
In Germany in 2009 there was considerable debate about the extent to
which the government should be intervening in the economy. For
example, its citizens were worried about the future of Opel, a German
car brand that was part of the ailing General Motors.
Some wanted the government to make sure jobs were saved no matter
what. Others, however, were more hesitant and worried about becoming
the government becoming too interventionist. Traditionally since the
Second World War the German government has seen itself as a referee
in market issues and has avoided trying to control parts of the economy
It would regulate anti-competitive behavior, for example, but not try to
run many industries. However in the recession of 2009 when the
economy was shrinking the government was forced to spend more to
stimulate demand and had to intervene heavily to save the banking
sector from collapse. The government also had to offer aid to businesses
to keep them alive.
Questions
1. What are the possible benefits of a government intervening in an
economy?
05
2. What are the arguments against government intervention in an
economy?
05
3. What prompted greater intervention by the German government in
2009?
05
4. What would determine whether the German continued to intervene on
this scale in the future? 05
Answers
HERE IS YOUR ANSWER ⤵️⬇️
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Q.1 . What are the possible benefits of a government intervening in an
economy?
Answer⬇️:
Governments can intervene to provide a basic security net – unemployment benefit, minimum income for those who are sick and disabled. This increases net economic welfare and enables individuals to escape the worst poverty. This government intervention can also prevent social unrest from extremes of inequality.
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Q.2 What are the arguments against government intervention in an
economy?
Answer⬇️:
Arguments against government intervention
Governments liable to make the wrong decisions – influenced by political pressure groups, they spend on inefficient projects which lead to an inefficient outcome. Personal freedom. Government intervention is taking away individuals decision on how to spend and act.
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Q.3 What prompted greater intervention by the German government in
2009?
Answer ⬇️ :
However in the recession of 2009 when the economy was shrinking the government was forced to spend more to stimulate demand and had to intervene heavily to save the banking sector from collapse. The government also had to offer aid to businesses to keep them alive.
_____________________
Q.4 What would determine whether the German continued to intervene on
this scale in the future?
Answer ⬇️:
Some wanted the government to make sure jobs were saved no matter what. ... However in the recession of 2009 when the economy was shrinking the government was forced to spend more to stimulate demand and had to intervene heavily to save the banking sector from collapse.
_____________________
Hey!! This is your Correct answer ✅
I HOPE ITS HELP YOU ☺️