Types of economy

Question 1

Three dimensions of allocation of resources

Answer 1

What is to be produced?
How is it to be produced?
For whom is it to be produced?

Question 2

Economic system

Answer 2

An economic system is a network of organisations used to resolve the problem of what, how much, how and for whom to produce.

Question 3

Economic planning

Answer 3

Government policies aimed at influencing trends in the economy.

Question 4

Capitalist economy

Answer 4

An economic system organised along capitalist lines uses market-determined prices to guide our choices about the production and distribution of goods. One key role for the state is to maintain the rule of law and protect private property.

Question 5

Command economy

Answer 5

An economic system where most factor resources are allocated by the government, with few officially sanctioned private markets

Question 6

Free market

Answer 6

System of buying and selling that is not under the control of the government, and where people can buy and sell freely, or an economy where free markets exist, and most companies and property are not owned by the state

Question 7

Mixed economy

Answer 7

Where resources are partly allocated by the market and partly by the government.

Question 8

Planned economy

Answer 8

In a planned economy, decisions about what to produce, how much to produce and for whom are decided by central planners working for the government rather than allocated using the price mechanism.