ETS Business Practice Exam

The definition of government intervention in the economy through laws and rules is indeed best captured by the concept of regulation. Regulation involves the establishment of guidelines and standards that businesses and individuals must follow, aimed at ensuring fair practices, protecting public interest, and maintaining the integrity of markets. This can include laws governing environmental standards, worker safety, product quality, and financial practices, among others.

In contrast, taxation refers specifically to the process of collecting money from individuals and businesses to fund government spending, rather than a set of laws and rules. Subsidization refers to the government providing financial assistance to encourage certain economic activities or support specific sectors, which does not primarily involve regulatory frameworks. Market liberalization involves reducing government restrictions and barriers in an economy, which runs counter to the concept of imposing rules and regulations. Thus, regulation is the most fitting term to describe government intervention through laws and rules.