• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

free-market economy and central planned economy.

Extracts from this document...

Introduction

Economics Essay T1- What are the main characteristics of a free-market economy and central planned economy. T2 - Evaluate the possible consequences that may be in counted when an economy makes a transition from central planning towards a free market. . Task 1 An economy may be defined as the state of a country or region in terms of the production and consumption of goods and services, and the supply of money. A planned economy is an economic system in which economic decisions are made by centralized planners, who determine what sorts of goods and services to produce how they are to be priced, and allocated. Since most known planned economies rely on plans implemented by the way of command, they have become widely known as command economies. These are generally associated with socialist or communist economic systems. A free market economy is an economy in which the allocation for resources is determined only by their supply and the demand for them. Every economic system is based on a different philosophical stand than the others. These differences are caused by the different responses that each economy has to the problem of scarcity. However, economies don't always work as their theoretical models and take some components from each system to develop an economy that works. Thus, economies are graded as being free market economies or planned economies using a tool called the economic spectrum, where the planned economies are placed on the left and the free market economies on the right. ...read more.

Middle

growth rate was nearly stagnant, growing by only 0.2 percent, consumer prices had risen by 250 percent, and real wages increased by a mere 9 percent. In view of the economic situation, the new government introduced radical measures that were intended to stabilize the economy and encourage the development of a free market. The country's much publicized "shock therapy" had begun. There was massive a cut down in government spending, private enterprise was allowed and the government sat back and watched. Initially the inflation rose and the situation seemed to be worsening, when entrepreneurship and the laws of supply and demand kicked in, and the free market economy began to materialize. In 1990-91, Poland experienced a deep recession throughout which GDP decreased by almost 20 percent, the demand for labour decreased, and unemployment increased. During the first 3 years of the nation's transformation, both the State sector and the cooperative sector lost 4.6 million jobs, while the flourishing private sector created 2.6 million new jobs. In 1992, the number of unemployed reached 2.8 million, of whom 80 percent had been previously employed. Since 1992, Poland has experienced annual economic growth ranging from 3 percent to 7 percent; correspondingly, inflation decreased from 585 percent in 1990 to 11.8 percent in 1998. Employment has increased, unemployment has begun to decrease, and real wages have risen once more ( as they say things get worse before they get better). The GDP growth rate witnessed an extreme rise. ...read more.

Conclusion

Consequently, even in the face of the economic slowdown, the Polish central bank imposed a deflationary policy, with high interest rates aimed at stabilising the value of the currency, the zloty. Obviously, this had further negative effects in terms of lower exports and greater import penetration. Since then, economic growth has slackened to the point where it was only 1 per cent last year, and the growth is expected to be even less this year. Poland has experienced a surge in the tourism industry. It has opened up to foreign investors and found itself a place in the global economy. Poland has also opened up to Western media and publications which has increased its global awareness but also brought with it pornographic content. Under the command economic system, Poland's natural resources were fast depleting and suffering from contamination, rendering them useless. The transition to free market has lead to greater environment awareness and steps have been taken by the Polish government towards rehabilitation of the environment and protection of the natural resources. Certainly, the free market principles have not delivered the rosy picture they painted to Poland. Poland has paid an extremely high price for a liberal economy, one it continues to pay; but the situation has improved from what it was under a command economy, and though it's not a desirable condition, it is the lesser of the two evils. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Extended Essay

    2.1 The principles of the new subsidy system The government introduced the new system on 1st January 2007. The social and labour minister announced that only two third of the households will be able get gas price compensation and then in the future the government will slowly reduce the number of households afforded this luxury.

  2. Economics Extended Essay - To what extent has the market for paintings in South ...

    two for master artists and two for contemporary artists. After that I interviewed the gallery owners to ask them for their views on the art market as a whole. I asked them what factors determined the price of the painting, the effect of the speculators and other questions.

  1. Strategic and Operational Performance Assessment at Petrom

    The concept for filling stations inaugurated in 2005, PETROMV, represents the expression of a customer oriented company. The conveniences are new for the distribution sector and vary from the basic services for a filling station to additional services (restaurant, terrace and playground)

  2. The structure of the EU budget and its allocation

    of less than 90% of the EU average. As such, it covers all 12 new member states as well as Greece and Portugal. Spain is also eligible for the Cohesion Fund, but on a transitional basis (so-called "phasing out"). For Regional Policy and the Cohesion Fund, the variation between initial

  1. Exchange Rates: fluctuation effects on an Economy

    This can have an unconstructive outcome on competitiveness and demand for exports. Higher import costs will inevitably cause this wage-price response. The governor of the Bank of England stated that such rates of exchange create 'great currency tension'2. Such tension could hurt the dollar further; countries such as China, baring

  2. Allocation of Resources

    tends to also promote the good of his community, through a principle that he called "the invisible hand". Specifically, a free competitive market ensures that those goods and services perceived as most beneficial, efficient, or of highest quality will naturally be those that are most profitable.

  1. Use a diagram to show the consequences of government imposing a price above or ...

    As market conditions change, it also takes a long time until the landlords could adjust the number of apartments they rent. As a result, rent control in the short run had quite a positive impact. However, as time passes, the disadvantages of rent control outweighed the advantages.

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    The ships then travelled across the Atlantic to the American colonies where the Africans were sold for sugar, tobacco, cotton and other produce. The Africans were sold as slaves to work on plantations and as domestics. The goods were then transported to Europe.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work