The positive contribution of politics in the determination of economic policy is that it takes market failures and failures of market outcomes into account when formulatiing policy. True or False
To determine if the statement is true or false, we need to understand the relationship between politics and economic policy.
Politics plays a significant role in shaping economic policy. Governments are responsible for formulating and implementing policies that affect the economy. Economic policies are often developed to address market failures and ensure that resources are allocated efficiently.
Market failures occur when the free market fails to allocate resources efficiently or deliver desirable outcomes. Some examples include externalities (such as pollution), information asymmetry (where one party has more information than the other), and the lack of public goods (goods that are non-excludable and non-rivalrous).
In response to market failures, political systems intervene by implementing economic policies designed to correct these failures. By taking market failures and failures of market outcomes into account, political decision-makers can shape economic policies that aim to promote socioeconomic welfare, equity, and stability.
Therefore, the positive contribution of politics in the determination of economic policy is that it considers market failures and failures of market outcomes when formulating policies. Hence, the statement is true.