Economic Systems

In a free-market economy, how are the prices of most resources, goods, and services determined?

• The government sets official price ceilings and output targets.

• A central planning committee manages all production and costs.

• Prices are decided primarily by and demand between private individuals and businesses.

• Prices are fixed by international trade agreements.

Which economic system is characterised by the government owning most resources and setting all prices and output targets?

• Free-market economy

• Mixed economy

• Globalised economy

• Planned economy

What accurately describes a mixed economy?

• It relies solely on private enterprise, with no public services.

• It is an economy where the private sector has been completely nationalised.

• It is a combination of private businesses and public services.

• It is defined by people producing goods only for themselves and their families.

Ownership of Resources In a planned economy, who typically owns the majority of the resources?

• Private households and families.

• Large public limited companies (plc).

• The government.

• Co-operative run by their members.

If an economy features both a privately owned supermarket and a state-owned national railway or public school, which economic system does it most likely represent?

• A purely free-market economy, as the government role is very limited.

• A purely planned economy, as the government controls transport.

• A subsistence economy, focusing on self-sufficiency.

• A mixed economy, as it combines private enterprise and public services.

The Impact of Privatisation Privatisation (selling a government-owned business to private individuals) moves a section of the economy toward which system?

• Toward a free-market/private enterprise structure.

• Toward a planned economy structure.

• Away from competition and efficiency.

• Toward long-term planning, regardless of profit.

A key feature of a free-market economy is limited government involvement. What is a likely consequence of this limited control?

• Governments ensure universal access to services like water and electricity.

• Output targets are strictly enforced by the state.

• Private individuals and businesses are driven by supply and demand, potentially leading to lower efficiency in public services.

• Private individuals and businesses are driven by supply and demand, potentially leading to investment and efficiency, as private owners run the business for profit.

If a government decides to nationalise a struggling private industry, such as a major electricity provider, this choice is generally associated with policies that support:

• Lower government spending and reduced risk to taxpayers.

• The need to ensure the service is accessible for everyone.

• Encouraging competition among suppliers.

• Raising money for the state by selling off assets.

If a government decides to nationalise a struggling private industry, such as a major electricity provider, this choice is generally associated with policies that support:

• Lower government spending and reduced risk to taxpayers.

• The need to ensure the service is accessible for everyone.

• Encouraging competition among suppliers.

• Raising money for the state by selling off assets.