Q.
a) Explain the basic economic problems that every economic system must resolve. (10 marks)
b) Do you agree with the statement that a "mixed economy" is the most suitable form of economic system in a democratic system? Give your opinion. (10 marks)
(20 marks, 2014 Q1)
A.
a) Basic economic problems are here.
b) Mixed economy and democratic system are interlocked. It is a check and balance system with the best outcome of control of the economic pie to be enjoyed by all. The government controls the distribution of national wealth and the people are given certain freedom to venture into their own economic activities without too much restrictions. The venture by private entities are given protection and in fact, government periodically gives out incentives, subsidies and other technological supports to those venture capitalists to encourage innovation and seeding of young small medium enterprises.
When a government enterprise becomes too limited in own growth, it can be corporatized and becomes private entity, thus fostering further growth and innovation. A democratic elected government would ensure a certain choice by the people as to what economic policies the people should benefit most. If the policy is not favorable to the country, and people as a whole, a new government can be elected, thus protecting the rights of the people to share the economic resources of the nation.
2012 Q1 part a) also asked about Malaysia being a mixed economy. Refer here.
Ref:
Own account.