Reasons for regulations on the sectors of economies
Some sectors of the economy need regulations in performance to enhance the efficiency at different levels of production. In a situation of high productivity, economies require maximum use of the available resources with constraints of time and funds (Howard, 2001). Economies target to optimize production while minimizing spending.
The finance sector is sensitive in any economy. It requires regulations to be clearly stated in controlling the liquidity levels. This is aimed at having a direct control on interest rates. Other sectors are production and distribution. Their regulation is for enhancing production of high quality goods and services. To add onto this, there is a need to get products to the consumer on time to avoid any product shortages.
Regulations in the business cycle
Regulation in parts of the business cycle depends on the situation of the economy. The demand and also the supply products in the business necessitate specific regulations that enhance the balance in the market. When in a trough, regulation is needed to promote recovery in an economy. If the economy is at the peak, regulation prevents erratic downturns. These factors include inflation, productivity, monetary and fiscal policy, state of the global economy, employment level, and exchange rate (Howard, 2001).
The way regulation should be limited
Regulation should focus on controlling the economy in productivity to enhance the economic expansion. As far as market forces are concerned, regulations are supposed to take place at the extreme. The balancing of these forces should be guided by the demand and also the supply of the product. This will reflect the true economic dynamics in the market.
Reference
Howard, M. (2001). Public Sector Economics for Developing Economies. Kingston: Univ. of the West Indies Press.
