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Strengths and Weaknesses of Market-Oriented Policies

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Questions and Answers

What is the main purpose of incentive-related policies involving adjustments to taxes?

To reduce economic growth
To decrease the incentives to work and invest
To limit the allocation of resources
To improve incentives to work, innovate, and invest (correct)

How does trade liberalization affect markets?

It increases efficiency in production and lowers prices (correct)
It limits consumer choice
It creates trade barriers
It reduces competition and efficiency in production

What is a major benefit of freely floating exchange rates?

Automatically adjusting to excess demand or supply of a currency (correct)
Reducing flexibility for policy-makers
Limiting the balance of payments
Stagnating economic growth

How does opening up countries to free trade impact markets?

It improves the allocation of resources and increases economic growth (B) Signup and view all the answers

What is the role of market-determined exchange rates in international transactions?

To reflect supply and demand forces for a currency (C) Signup and view all the answers

How do larger free markets resulting from trade liberalization impact consumer choice?

Increase consumer choice (C) Signup and view all the answers

What is the main idea behind market-oriented policies?

To rely on free markets and competition for resource allocation (A) Signup and view all the answers

How do market-determined prices help in a market-oriented economy?

By acting as signals and incentives for decision-making (A) Signup and view all the answers

What is the purpose of policies encouraging competition like deregulation and privatisation?

To make markets more competitive and improve resource allocation (C) Signup and view all the answers

How do labour market reforms contribute to market-oriented policies?

By allowing free market forces to improve resource allocation (B) Signup and view all the answers

Which factor is NOT a benefit of policies encouraging competition in a market-oriented economy?

Higher prices for consumers (C) Signup and view all the answers

Why are freely floating exchange rates considered a part of market-oriented policies?

To allow exchange rates to be determined by supply and demand in free markets (D) Signup and view all the answers

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