Strengths and Weaknesses of Market-Oriented Policies

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

To improve incentives to work, innovate, and invest

How does trade liberalization affect markets?

It increases efficiency in production and lowers prices

What is a major benefit of freely floating exchange rates?

Automatically adjusting to excess demand or supply of a currency

How does opening up countries to free trade impact markets?

It improves the allocation of resources and increases economic growth

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

To reflect supply and demand forces for a currency

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

Increase consumer choice

What is the main idea behind market-oriented policies?

To rely on free markets and competition for resource allocation

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

By acting as signals and incentives for decision-making

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

To make markets more competitive and improve resource allocation

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

By allowing free market forces to improve resource allocation

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

Higher prices for consumers

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

Explore the strengths and weaknesses of market-oriented policies such as competition encouragement, labour market reforms, and trade liberalisation. Understand the benefits of market-based supply-side policies and incentive-related measures.

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