Th2.6: Market Based and Interventionist Methods

Question 1

What are market based policies?

Answer 1

policies which are designed to remove anything that prevents the free market system working efficiently, causing lower output and higher prices

Question 2

What do these barriers in market based policies include?

Answer 2

those which reduce willingness of workers to take jobs or lead to inefficient production, high prices or a lack of risk-taking

Question 3

What are interventionist policies?

Answer 3

policies designed to correct market failure, for example the free market under provides education and so the government provides it

Question 4

IP: Why might governments take actions to encourage investment?

Answer 4

firms may only look into the short term and look to maximise short run profits to give to shareholders instead of investing

Question 5

Why do free market economists tend to argue for market-based policies?

Answer 5

as they want the government to have as small a role as possible

Question 6

What do economists who support interventionist policies suggest?

Answer 6

the free market is not as efficient as people believe and so the government needs to intervene and improve it