Non-voluntary government policies, primarily financed by taxes, compel individuals and businesses to adjust spending or increase production to counteract tax impacts.
Macro Policies and Micro Outcomes
Positive macroeconomic policies during economic turmoil may inadvertently hamper individual firms. For instance, propping up wages during the Great Depression made hiring extra employees unprofitable for individual firms.
Government Spending's Market Effects
Government spending can disrupt markets, constituting a wealth transfer from taxpayers to entities receiving government funds. Subsidized businesses may operate on a cost curve not feasible without the subsidy, affecting other market participants.