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• STATE ECONOMY:

State economy is a market,


that is controlled by the
government.
Definition

• MARKET ECONOMY :Market economy is


the type of economy, based on division of
labors in which the price of goods and
services are determined in a free pricing
system. Set by supply and demand.
History how government came into
existence

Adam smith free market policy


The advantages of free market system are:
- the free market responds quickly to people's wants.
- the Market produces a wide variety of goods and services to meet
consumer's wants
- the market system encourages the use of new and better methods
and machines to produce goods and services.
The disadvantages of free market are:
- the factors of production will be employed only if it is profitable to
do so.
- the free market can fail to provide certain goods and services.
- the free market may encourage the consumption of harmful goods.
- the social effects of production may be ignored.
- the market system allocates more goods and services to those
consumers who have more money than others.
History how government came into
existence
Cause of free market
• Rising prices, unbalanced wages and
overbuying on credit were to blame.
• The gap between rich and poor widened
• By the late 1920s, American consumers were
buying less
• Economic downturn became known as Great
Depression
Great Depression

• The wealthiest 1% saw their income rise


75%
• The rest of the population saw an increase
of only 9%
• More than 70% of American families earned
less than $2500 per year
Great Depression
Increased government spending supported by theories of
British economist John Maynard Keynes
• Believed governments could limit, prevent economic
downturns
• Governments should spend money
– Spending would help increase economic output
– Factories would hire workers to meet new demand
– Eventually workers would begin spending, depression would end
• Government spending did help U.S. economy, but
depression lingered through 1930s
Government Response
• Increased federal government’s role in lives of Americans
• Pushed forward New Deal, program to fight Great Depression
• Provided government spending to help start economic recovery
• Public works programs to provide jobs, government money for welfare, relief
• New regulations to reform, protect stock market, banking system
CHINA ECONOMY
China’s leaders call their economic system
as “Market socialism” and also as “ state
capitalism” and market-oriented mixed
economy under one party rule”.
facts
• In 1978, china introduced farm reforms
• In 1987, Chinese government set a goal to
double the ‘Gross National Product’ from
1980, which they achieved before 1995.
Facts……
• Its the effectiveness of the reforms, that
made china’s economy successful over
the last 30 years.
• China is expected to surpass both Japan
and US and become the world’s largest
economy by 2022.
Comparison India china
• Agriculture.
• Liberalization of market.
• Difference in infrastructural & other
aspects of economic growth.

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