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Given the degree of government interference in market economies and the increased economic freedom in command economies, do you think the two types of economic systems will converge into one?

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´╗┐Introduction of Economic System An economic system is the combination of the various agencies, consumers, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money and so on are continuously flowing. In short, economic system is an organized way in which a state or nation allocates its resources and apportions goods and services in the national community. Market Economy Market economy is the economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning. Market economies work on the assumption that market forces, such as supply and demand, are the best determinants of what is right for a nation's well-being. These economies rarely engage in government interventions such as price fixing, license quotas and industry subsidizations. Free market system in which decisions regarding resource allocation, production and consumption, price levels and competition, are made by the collective actions of individuals or organizations that are seeking their own advantage. Command Economy Command economy is an economic system in which the means of production are publicly owned and economic activity is controlled by a central authority or government. Central planners determine the assortment of goods to be produced, allocate raw materials, fix quotas for each enterprise, and set prices at goods offered for sale. ...read more.


Even in industries which are not owned or run by the government, its influence is very noticeable in the form of taxes and regulations like wage controls. Today, the economies of most industrial countries are considered mixed economies. In Western European nations the government usually plays a larger role in the economy than in North America. Since the fall of the Soviet Union in 1991, the only two major planned economies are those of North Korea and the People's Republic of China. However, China has begun to incorporate some market mechanisms, such as competition, into its economy. Since its establishment in 1949 and until the end of 1978, China maintained a centrally planned or command economy. By 1978, nearly three-fourths of the country's industrial production was produced by centrally controlled state-owned enterprises (SOEs) according to centrally planned output targets. There were almost no private enterprises or foreign invested firms in China. It was estimated that China's real GDP grew at an average annual rate of about 5.3 percent from 1960 to 1978. The transition of the country's economic system from a command to a market-based economy helped fuel a strong average growth. China's trade and investment reforms as well as its incentives led to a surge in foreign direct investment (FDI), which has served as a major source of China's capital growth. Annual utilized FDI in China grew from US$636 million in 1983 to US$45.6 billion in 1998, making China, in the late 1990s, the second largest destination of FDI. ...read more.


economy. Adding state and local governments brings the public sector share up to about 28 percent. With that kind of economic clout, government at various levels has a lot to say about what is produced in our society and who gets what. Nevertheless, the United States relies on markets to a larger degree than any other major industrial nation in the world, so from a relative standpoint, it is indeed a free market economy. The mixed economy works because the two primary players, the private sector and public sector, each providing benefits to each other. The private sector?s goal is to generate profit. For every dollar in revenue for the private sector, there is a tax that goes directly to some level of government. The public sector can then afford to continue providing its services to the people, which include but is not limited to, the businesses. Citizens also pay taxes through either goods or services from the private sector or public sector. Conclusion In conclusion, mixed economy as the name suggests is an economy where all the activities related to production and other activities are carried out by participation of both government and private enterprises. Therefore, when the two types of economic systems which are market economy and command economy converge into one, it will become the mixed economy. This is because mixed economy has more advantages than disadvantages, it will bring countless benefits to the economy of the country. The combination of market economy and command economy brings out the balance of an economy of a country if the country practices mixed economy. ...read more.

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