Highlight how the government can act as both a buyer and a seller in business activities.

The
government acts as a regulator and monitors the economy. Although most countries have a free
market system, the government will take action if it notices that the economy might be in
trouble. For example, the government can control the supply of money in the economy by being
both a buyer and seller of securities.

activities are usually influenced by
interest rates. When the interest rates are low, more people are enticed to borrow because the
cost of loans is low. As a result, the supply of money in the economy increases. Since theres
more money in the economy, the price of most things goes up because people can afford them. A
little inflation is good for the economy because it stimulates business activities. However, if
the prices just keep on rising, the economy could face a recession or depression. The government
has to step in and become a seller of securities. When the government sells securities to
commercial banks, it reduces the money supply. As a result, prices stabilize.


On the other hand, the government becomes a buyer of securities when it
wants to increase the money supply and stimulate economic activity.