Question

If the United States government were to regulate its financial structures, including banks and businesses, which of the following criteria of a capitalist economy would it violate? A. Consumer interests affect capitalism. B. Prices and wages are set by supply and demand. C. Privately owned resources are used to make a profit. D. Government involvement in businesses and markets must be limited.If the United States government were to regulate its financial structures, including banks and businesses, which of the following criteria of a capitalist economy would it violate? A. Consumer interests affect capitalism. B. Prices and wages are set by supply and demand. C. Privately owned resources are used to make a profit. D. Government involvement in businesses and markets must be limited.

Answer 1

The correct answer is D.

A pure market economy, or capitalist economic system is characterized by zero goverment intervention in the economy. Instead, markets are allowed to freely fluctuate, and the interactions between the economic agents (households, firms and public sector) determine the prices and the output in both product and factor markets.

Therefore, if the US authorities intend to control banks and businesses, such action is violating the "zero interventionism" principle and the laissez-faire approach, hence the main criteria of capitalism.

Answer 2

The correct answer is "D".

Capitalism is a political philosophy that believes in "laissez-faire" economy. This means that the government should abstain from getting involved in businesses. These entities should always be run by private parties who search to be profitable by operating them. Government involvement will probably end up in subsidies that aim to aid ineffective participants in the market. This is proven to harm the economy in the middle term, these sectors won't be able to thrive against foreign competition.