1. In the free enterprise system of the U.S. economy, the government exercises minimal involvement.
2. The three specific areas where the government plays an important role include:
- Providing the legal and social framework (laws and regulations)
- Maintaining competition (antitrust laws)
- Stabilizing the economy (The Fed).
What is a free enterprise system?
A free enterprise system ensures that there are few restrictions placed on business activities and ownership.
Governments can intervene minimally to:
- Provide public goods and services (state and local governments).
- Redistribute income (social security)
- Correct externalities in the economy.
For example, the United States government ensures that market participants do not engage in:
- False advertising
- Environmental hazards
- Unsafe products (foods and drugs, inclusive).
Thus, the government exercises minimal involvement in a free enterprise economic system.
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