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Money Supply

In a free eco...

Question

In a free economy the decision about investment, savings and consumption are decided by ______.

A

price mechanism

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B

central bank

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C

planning commission

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D

finance budget

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Solution

The correct option is A price mechanism
In a free economy the decision about investment, savings and consumption are decided by the price mechanism. Price-mechanism is an important feature of this economy. In this the prices are determined by the free interaction of the forces of demand and supply. It is an automatic self-regulating mechanism which runs with the motive of profit.

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