Full Employment

Abstract

In chapter 1 we drew together the various reasons for government interference in the market economy, classifying them under three broad objectives: (i) allocation of resources, (ii) stabilisation and (iii) re-distribution of wealth and income. Again, however, it must be emphasised that rarely are these three broad objectives mutually exclusive. For instance, monetary measures to stabilise the economy will affect the allocation of resources and the distribution of wealth and income. Thus not only does a rise in the rate of interest hit in particular those firms needing large amounts of capital, but it reduces the value of wealth held by persons and institutions who have invested mainly in long-term government stock (see p. 340).