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Business & Finance
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"Free market economies stimulate greater economic growth, whereas state-directed economies stifle growth." Why is this statement true? Support your answer.

Aug 13th, 2015

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Free market economies are economies that are left to run on their own using the forces of demand and supply whereas state directed economies as the name suggests are those economies that are directed and controlled by the government.

A free market economy stimulates growth because businesses want to keep up with the competition and make money. This makes the businesses able to purchase more goods and/or services to sell and therefore stimulating growth in the economy. Supply and demand drive a free market economy. If the demand is high and the supply is low, then the price of a commodity will go up. 

On the other hand, State-directed economies stifle growth because resources and income are channeled to a central agency within the government. The government then takes up the responsibility of allocating finances back into programs that the government deems important. If companies are not productive and there is no competition,they lack efficiency and remain nonprofitable and therefore stifle economic growth.

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Aug 13th, 2015

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