Government responsibilities to business: Establishment and enforcement of laws: Government establishes laws and regulations under which the

business functions. Laws and regulations covering all aspects of business are enacted by government. Government is responsible for providing the rules of the game which make the business system function smoothly and which help maintain competition, or if monopolies develop, to regulate them or supplement them by government operations. The government enforce the laws and provide a system of courts for adjudicating differences between business firms, individuals, or government agencies. Maintenance of Order: Government has the responsibility of maintaining order protecting persons and property. It would be impossible to carry on business in the absence of a peaceful atmosphere. Money and credit: The government provides a system of money and credit by means of which transaction can be affected. It is the responsibility of the government to regulate money and credit and protection the integrity of the local currency, that is to guard against rapid fall in its value. Orderly growth: It consists of balanced regional development, distributive justice, full employment and protecting the economy against booms and busts. The government has the resources and capabilities to ensure orderly growth. Information: Government agencies publish and provide a large volume of information which is extensively used by business firms. These information are provided by different government ministries, commerce, labour, agriculture, health, education and so forth. These information constitute economic and business activity in general, specific lines of business, scientific and technological development and many other things of interest to business leaders. Assistance to small industries: Small size businesses have special role to play in the economy. Being small in size these firms face problems related to finance, marketing, know-how and dohow and infrastructure facilities. Government encourages these businesses to grow. Transfer of technology: Government owned research establishment transfer their discoveries to the private industry in order to put them to commercial production. For example, the use of isotopes for making highyield hybrid rice. Government competition: Government often competes with the private businesses for the purpose of regulating competition, improving quality, or to supplement private activities with government programmes. In some cases, the government regulates the prices which may be charged for buyers.

Inspections and licenses: Government agencies conduct inspection activities, foods and drugs, for example, assuring quality products to consumers. Government issues licenses to competent business establishments to carry on different activities. Tariffs and Quotas: Tariffs and quotas are used by the government to protect business from foreign competition. Like the government often protects local industries by giving incentives and subsidies, which is called protectionist policy. For example, infant industry protection. Reasons for Intervention: Tariffs: The use of tariffs is another way that a government intervenes in the business sector. They help inefficient domestic producers by forcing consumers to pay higher prices for imported goods. The use of tariffs forces people to pay higher prices for certain goods and thus resulting in less money the consumer has to spend on other goods and services. This results in less employment in the industries that produce such goods and services. It is a way of protecting a job at the expense of a worker in another industry. Subsidies and Loans: In this method money is taken from efficient producers and workers to keep inefficient producers in business. Consumers pay for this method in the form of higher prices. As Henry Hazlitt has noted, it is important that antiquated, inefficient companies die out so that new, efficient companies can grow faster; i.e., so capital and labor will find their way into more modern industries Wage and price controls: Wage and price controls are another way government can intervene in the business sector of the economy. It is impossible to put price restrictions on every product and service that exists in the economy. The result is that producers will produce fewer of those products that are restricted, thus people will have more money available for other products, which in turn will cause the prices of the non restricted product to rise faster than normal High wage levels are a compilation of minimum wage laws which force employers to negotiate with unions. By simple laws of supply and demand, if wages are forced up, business hire less people, thus increasing the unemployment level. Price fixing: is a policy designed to help the poor and needy of the economy. In this policy, the price of a product is fixed or set at a level below the equilibrium point, so as to allow each consumer the ability to afford it. To be able to pull this off, the government must provide the producers with help in the form of subsidies in order for the producers to maintain the supply. Small and big businesses are guilty of inviting government intervention in the free market. They continually ask the government to step in and protect them. Small businesses ask for less regulation on small business and more regulation on big business. Fair-pricing laws are a way

both large and small businesses keep the government involved and hurt the consumer. These laws keep prices high and hurt efficient competitors.

Notes: Central banks act as the fiscal agent of the government, issuing notes to be used as legal tender, supervising the operations of the commercial banking system, and implementing monetary policy. By increasing or decreasing the supply of money and credit, they affect interest rates, thereby influencing the economy. Modern central banks regulate the money supply by buying and selling assets (e.g., through the purchase or sale of government securities). They may also raise or lower the discount rate to discourage or encourage borrowing by commercial banks. By adjusting the reserve requirement (the minimum cash reserves that banks must hold against their deposit liabilities), central banks contract or expand the money supply. Their aim is to maintain conditions that support a high level of employment and production and stable domestic prices. Central banks also take part in cooperative international currency arrangements designed to help stabilize or regulate the foreign exchange rates of participating countries.