Chapter 20.3

Question 1

What are market oriented policies?

Answer 1

They are dynamic, outward-looking, macroeconomic policies used to stimulate economic growth and development via market forces

Question 2

What are the main focuses of market oriented policies?

Answer 2

-Focus on increasing the productive capacity of the economy by improving healthcare, education and infrastructure to achieve economic development.
-Focus on improving the supply-side of the economy by using the price mechanism and liberalized capital flows between countries

Question 3

Why are market oriented policies supported?

Answer 3

Market forces allocate resources efficiently, thus enhancing economic development. Such policies also create incentives to invest in the economy.

Question 4

What are examples of market oriented policies?

Answer 4

Deregulation, trade liberalization, privatization, labor market reforms, and tax reforms

Question 5

What is deregulation?

Answer 5

The reduction or removal of rules and regulations in a particular industry, therefore creating a greater degree of competition and encouraging market forces to allocate resources.

Question 6

What is trade liberalization?

Answer 6

Policies that encourage free trade, including the free movement of capital flows, by removing barriers to international trade

Question 7

What is privatization?

Answer 7

Process of transferring ownership of public-sector assets to private-sector ownership. Private-sector firms, driven by financial motives, are argued to be more economically efficient than bureaucrats running public-sector organizations.

Question 8

What are labor market reforms?

Answer 8

Policies that remove inefficiencies in the labor market, thereby creating greater flexibility and productivity

Question 9

What are tax reforms?

Answer 9

Lower rates of income tax and corporation tax create incentives to work and to supply