GENERAL KNOWLEDGE

Detailed explanation-1: -In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers.

Detailed explanation-2: -There are multiple components of an economic system. Decision-making structures of an economy determine the use of economic inputs (the factors of production), distribution of output, the level of centralization in decision-making and who makes these decisions.

Detailed explanation-3: -In the other, socialism, the state owns the means of production, and state-owned enterprises seek to maximize social good rather than profits.

Detailed explanation-4: -An economy is a nation’s method for making economic choices that involve how it will use its resources to produce and distribute goods and services to meet the needs of its production.