Describe political functions of government that entail its involvement in economy.

Political processes of government can direct better economic efficiencies of production and consumption.

Public support or discouragement of certain particular kind of economic activity is done through political arena, to attain socio economic welfare goals.

The political functions of government, including economic involvement are

1. Government sponsored or government inhibited goods

• Sponsored goods are considered beneficial for society, and hence gain state support. Example : Subsidy for education and sports
• Inhibited goods are considered harmful for society, and hence get state discouragement. Example : addiction goods are highly taxed.

2. Income Redistribution - it is for better equity in income and living standard

• Transfer payments are unilateral aid or assistance payments, for which no productive activity is done. Example : Old age pension
• Progressive Tax are the tax which are levied more for higher income people, and low for lesser income people.