1.1.6 Free market economies, mixed economy and command economy

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    a) The distinction between free market, mixed and command economies: reference to Adam Smith, Friedrich Hayek and Karl Marx

    b) The advantages and disadvantages of a free market economy and a command economy
    Free Market Economy

    c) The role of the state in a mixed economy
    The state allocates the resources for the public sector so that neither the public nor private sector get excess resources or face shortages
    • It serves as the allocating personnel of the economy’s resources
    The state decides and distributes subsidies to households and sectors that need it and similarly collect taxes from households or sectors
    • In order to have a fairer distribution, the state does this
    The state acts as a stabilizer; it prepares plans, policies and strategies and ensures that it gets implemented effectively

     

     

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