Question

Discuss
the distribution of
resources in mixed economy.
​

Answer 1

Answer:

Mixed economies may have a distinct private sector, where resources are allocated primarily by market forces, such as the grocery sector of the UK economy. Mixed economies may also have a distinct public sector, where resources are allocated mainly by government, such as defence, police, and fire services.

Answer 2

Answer:

The mixed economy has an element of both the free economy and the planned economy. It reflects the fact that both market and government participation is required in the allocation of resources, as both systems have disadvantages which are corrected by the other. It includes both capitalist and socialist economic policies and often arises in societies that seek to balance a wide range of political and economic views  . The mixed economic system is used in most countries, but the extent of the influence of the market or government varies from country to country.

The UK for example is a mixed economy with a majority of decisions made by the market due to the high level of efficiency in responding to the needs of consumers and some by the government. In a mixed economy, individuals can help guide the economy not only through the choices they make as consumers but through the votes they cast for officials who shape economic policy.

John Maynard Keynes thought it would be beneficial for the government to use fiscal and monetary measures to mitigate the negative impact of economic recessions, depressions and booms. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. The events of the recession in 2007 has seen a resurgence in Keynesian thought. World leaders have used Keynesian economics to justify government stimulus programs for their economies .

During the last two decades of the 20th century, many governments committed to the free market pursued policies of liberalisation based on substantial amounts of deregulation hand-in hand with the privatisation of industries owned by the state. The aim was to decrease the role of government in the economy and to increase competition. Even so, red tape is alive and well. In the United States, with some 60 federal agencies issuing more than 1,800 rules a year, in 1998 the Code of Federal regulations was more than 130,000 pages thick. However, not all regulation is necessarily bad. According to estimates by the American Office of Management and Budget, the annual cost of these rules was $289 billion, but the annual benefits were $298 billion.

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WHAT FACTORS DETERMINE THE EXTENT TO WHICH AN ECONOMY IS MIXED?

• Political ideology
• Political ideologyFiscal policy
• Political ideologyFiscal policyMonetary policy
• Political ideologyFiscal policyMonetary policyExistence of an efficient market

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