1- Investment: Why is there le

1- Investment: Why is there less investment ina participatory than in a capitalist economy? Relate your answer tothe difference between who owns capital and who gets profits.

2- China’s Economic Growth: According to thearticle “Understanding China’s Growth: Past, Present, and Future,”what is the main difference between the types (sources) of economicgrowht between the pre-1978 and post-1978 periods?

3- Price liberalization: Describe the processof price liberalization in transition countries. What were theconsequences?

Answer:

Answer – a

In participatory economy there no private production and thereis no personal profits, production and distribution done bygovernment.so, Government is also responsible for investments.Government invest in the way where there is maximum social surplus.To maximize social government not only have invest but also have todecided where. So there is only one investor in participatoryeconomy and he (government) is not interest in profits. So investbecome very limited/less.

           On other hand capitalist economy individual can have zero tounlimited profits, so this profits promote them to invest more.

Answer – b

China pre 1978 economy was based on heavy industrialization inthe country. But after 1978, major contribution in china growth inhigh growth in productivity and high investment in humancapital.

Answer – c

Price liberalization – To allow prices to moveaccording to market forces (its demand and supply). Developingcountries are liberalizing there economy slowly.

Which sector of economy has become developed, and there are lotsof producer in that sector and also can compete withinternationally, country make price liberalization in that sector.         

Price liberalization can cause many problem to developingcountries like, in developing country firm are monopoly ormonopolistic competition, so they will try to gain maximum profit,in profit maximization there will be loss of consumer surplus andloss of total social welfare.


 
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