LESSON 21.3 The role of the government in the economy
LEARNING INTENTION By the end of this lesson you should be able to describe the different roles played by the government in the economy.
Tune in We have probably all heard of some or all of the following government agencies: • Reserve Bank of Australia (RBA) • Australia Taxation Office (ATO) • Medicare • Centrelink. They are official government bodies that assist consumers and businesses to manage their interaction in the economy. 1. Mind-map what you think are the main functions of each of these institutions. 2. Discuss why we need these institutions.
FIGURE1 Centrelink and Medicare are two important Australian government agencies.
21.3.1 Role of the government The involvement of government in our market system is illustrated by FIGURE2 . We can see that both households and businesses pay taxes to government. Some of this money comes back to households in the form of welfare payments such as pensions, or as services such as education and healthcare. Some of it is spent on buying goods and services from businesses, or paying businesses to build roads, schools or hospitals.
FIGURE2 Model showing the role of the government in the flow of money, goods and services between households and businesses
Taxes
Government
Taxes
Government spending (welfare, education, healthcare)
Government spending (goods and services)
Households
Businesses
SkillBuilder discussion Investigating 1. Study the diagram in FIGURE2 . Discuss the role of the government. 2. Why is the government placed in the centre of the diagram, between the businesses and households? 3. What is the link between taxes and government spending?
604 Jacaranda Humanities Alive 8 Victorian Curriculum Third Edition
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