Factor markets (or resource markets) are markets for the inputs to production. A producer is typically a seller in the market for a product (supply SG in the graph below) while simultaneously being a buyer in the markets for its factors of production (demand DF below).

Government authorities use taxes and/or government spending to control and stabilize the economic activity of a country. This is known as fiscal policy. The government has different instruments available to influence the economic activity of a country if it feels that this might be necessary. During recessions or in times of economic crisis, for instance, production is low and unemployment rates are high. To stimulate economic growth the government may use tax cuts or an increase in government spending.