ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Government policies can affect the cost of production and the supply curve through taxes, regulations, and subsidies. For example, the U.S. government imposes a tax on alcoholic beverages that collects about $8 billion per year from producers. Taxes are treated as costs by businesses.

Detailed explanation-2: -The government (1) provides the legal and social framework within which the economy operates, (2) maintains competition in the marketplace, (3) provides public goods and services, (4) redistributes income, (5) cor-rects for externalities, and (6) takes certain actions to stabilize the economy.

Detailed explanation-3: -Influencing interest rates, printing money, and setting bank reserve requirements are all tools central banks use to control the money supply. Other tactics central banks use include open market operations and quantitative easing, which involve selling or buying up government bonds and securities.

Detailed explanation-4: -Federal government spending pays for everything from Social Security and Medicare to military equipment, highway maintenance, education, and more. In 2022, the federal government spent the most on Social Security.