Economic Regulation – Working of a Regulatory Economy

economic regulation

A well-maintained economy is a very important requirement for a state to function smoothly. A well-regulated economy means that the country is very little or not dependent on outer sources of income by making use of its own goods and resources and at the same time creating income by exporting it’s goods to other countries.

Problems regarding regulating the economy are not very common in developed countries like the United States of America and the United Kingdom. However, in the countries which are currently in their development stage like Pakistan, this problem is quite common. The problems arise mainly when a country is unable to generate enough goods for its people and their income. In this case, it mainly has to borrow from other countries or organizations like the IMF for keeping it’s economy regulated.

Since every debt needs to be paid back in a given time, a country has to increase prices and taxes to generate enough money to pay its debts. This phenomenon is called inflation. Even though inflation causes a lot of difficulties for the people, it has a very major role in the regulation of a country’s economy. Even though a government has an important role in the regulating of an economy, people also need to be quite active.

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