Question

Imagine you are the President of country X. Country X had gone through a severe crisis that has resulted in unemployment, poverty, and less capital formation. As a solution, which of the following economic systems would you choose for different cases? Choose the correct option.

A: Socialist system if your country is a developing economy and experiences inequality among people

B: Capitalist system if your country is a developed economy and does not experience inequality among people

• A. Only A
• B. Only B
• C. Both A and B
• D. Neither A nor B

Answer 1

The correct option is C Both A and B

In a socialist system, the resources of production are owned by the state. The system focuses on social welfare over profit. Some of the advantages in the socialist system are minimum wastage of resources, addressal of income disparity, and protection of consumers. Therefore, in order to address inequalities in a developing economy, the socialist model would be best.

In a capitalist system, the resources of production are owned by private players or individuals in the market economy, and the distribution is driven by profits. Some of the advantages in the capitalist system are effective usage of resources, abundant production, and competition that fosters research and innovations. Therefore, a capitalist system would suit a developed economy with no inequality best.