Answer:

Explanation:

1. Efficiency:

First, the government should attempt to correct market failures like monopoly and excessive pollution to ensure efficient function­ing of the economic system. Externalities (or social costs) occur when firms or people impose costs or benefits on others outside the marketplace.

2. Infrastructure:

Secondly, the government should provide an inte­grated infrastructure. Infrastructure (or social overhead capital) refers to those activities that enhance, directly or indirectly, output levels or effi­ciency in production.Essential ELEMENTS are systems of transportation, power generation, communication and banking, educational and health facilities, and a well-ordered government and political structure. Since the cost of providing these essential services are very high and benefits accrue to numerous diverse groups, such activities are to be financed by the government.

3. Equity:

Markets do not necessarily PRODUCE a distribution of income that is regarded as socially fair or equitable. As market economy may produce unacceptably high levels of INEQUALITY of income and weather. Government programmes to promote equity use taxes and spending to redistribute income toward particular groups.

4. Economic Growth or Stability:

Fourthly, governments rely upon taxes, expenditures and monetary regulation to foster macroeconomic growth and stability to reduce unemployment and inflation while encouraging eco­nomic growth.Macroeconomic policies for stabilisation and economic growth includes fiscal policies (of taxing and spending) along with monetary policies (which affect interest rates and credit conditions). Since the development of macro­economics in the 1930s governments have succeeded in bringing inflation and unemployment under control.