ECONOMICS (CBSE/UGC NET)

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ECONOMICS

MARKET FAILURES

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
It was reported in 2002 that South Africa, a mixed economy, would face sharp increases in air and water pollution unless action was taken to develop environmentally friendly policies for its citizens. Why is a mixed economy thought to be a satisfactory means of achieving environmentally friendly development?
A
because all development is paid for by the government
B
because it allows external costs to be considered
C
because it ensures development at lowest cost
D
because it is the most productive system
Explanation: 

Detailed explanation-1: -The negative effects discussed on the other hand include creative destruction, natural social tension, health challenges, increase in income inequality, increased pollution and a depletion of natural resources. Examples from various countries have been used to illustrate these effects.

Detailed explanation-2: -The basic problems of an economy can be solved either by the decisions of the Government or by the Market through interactions of buyers and sellers.

Detailed explanation-3: -Economic growth depends in part on policies that affect productivity and the labor supply. Output per person grows when output increases faster than increases in population. That means anything that positively impacts productivity leads to higher rates of economic growth.

Detailed explanation-4: -Both taxation and government spending can be used to reduce or increase the total supply of money in the economy-the total amount, in other words, that businesses and consumers have to spend. When the country is in a recession, the appropriate policy is to increase spending, reduce taxes, or both.

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