CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics
A country's government abolishes its central planning body, sells most state-owned steel and telecom firms to private investors, and lets prices be set by demand and supply, while retaining laws to prevent monopolies and provide basic social security. Which statement best describes the resulting change?
The country has moved from a planned economy towards a market-oriented mixed economy. Privatisation, abolition of central planning and market-set prices point towards markets, but retained anti-monopoly laws and social security mean the government still plays a role, so it is not pure laissez-faire.
- AIt has moved from a mixed economy to a pure command economy
- BIt has moved from a planned economy towards a market-oriented mixed economyCorrect
- CIt has become a traditional economy governed by custom
- DIt has become a pure laissez-faire economy with no government role
Explanation
Ending central planning, privatising firms and freeing prices indicate a shift towards markets. Retaining competition laws and social security shows the state still has a role, so the economy is market-oriented mixed, not pure laissez-faire. Option A reverses the direction of change, and custom plays no role.
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