GED Social Studies TestEconomicsMedium
A country's government decides to privatize its national airline, selling it to a private company. This action is most consistent with the principles of which economic system?
- AMarket economy
- BCommand economy
- CMixed economy
- DTraditional economy
Show answer & explanationAnswer & explanation
Correct answer: A. Market economy
Privatization, the transfer of state-owned assets to private ownership, is a key characteristic and principle of a market economy, where private enterprise and competition are emphasized over government control.
Why the other options are wrong
- B. A command economy involves extensive government ownership and control, the opposite of privatization.
- C. A mixed economy combines elements of market and command, but privatization specifically moves towards market principles.
- D. A traditional economy relies on customs and historical practices, not modern policies like privatization.
Market Economy
An economic system where economic decisions and the pricing of goods and services are guided by the interactions of a country's individual citizens and businesses.
- Characterized by private ownership of resources.
- Relies on supply and demand to allocate resources.
- Government's role is typically limited to providing a legal framework and public goods.
Memory trick: Different systems balance freedom and control.