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Basic of Economicseconomics-mcqs › basic-of-economics
Published
26 May 2019
Last updated
28 May 2026

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Which of the following is more commonly associated with a free market economy compared to a planned economy?

Multiple choice question for Basic of Economics. Select an option, then review the explanation below.

Choose the correct answer

Explanation

In a free market economy, individuals and businesses have stronger incentives to innovate and create new products or services due to competition and profit motives. Planned economies typically lack these incentives because the government controls production and distribution. While planned economies may aim for full employment or provide public goods, innovation is more characteristic of free markets.

Practice related questions from the same subject.

  1. 1.Which of the following best describes deflation?
  2. 2.Under what condition can two nations benefit from engaging in international trade?
  3. 3.Which of the following represents a legitimate form of currency?
  4. 4.Which political ideology is best summarized by the phrase, "From each according to his ability, to each according to his needs"?
  5. 5.Which type of currency experiences a decline in its exchange rate due to a continuous balance of payments deficit?

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