Question

one method for organizing economic activity, i.e. deciding what is produced and how it is produced is the method used in the army. a central authority issues commands that are obeyed by people. these commands tell people what to produce, how much to produce, and who will produce what. an alternatve method of organizing economic activity is to rely on a free market. i.e. allowing people to engage in voluntary exchange where people are left alone to buy or sell only if they percieve it is in their self interest to do so and to let the market set the price of goods and services. there is no central authority telling people what to do and people are left alone to order their lives as they see fit. according to milton friedman:

Answer 1

Based on the ways of organizing economic activity, Milton Friedman believed that C. Generally speaking, economies that rely on voluntary exchange have produced more prosperity and freedom for its citizens than central controlled economies.

What did Milton Friedman say?

Milton Friedman was of the opinion that evidence showed that on average, economies like the Free Market Model, where there is voluntary exchange of goods and services, have seen higher levels of prosperity.

This is as opposed to Command economies where the economy is centrally controlled. These economies do not have voluntary exchange and instead works by orders being given by the government.

Options for this question include:

• A. History has shown us that centrally controlled command economies promote prosperity and freedom.
• B. The Soviet Union is and example of a centrally controlled command economy that produced prosperity and freedom for its citizens.
• C. Generally speaking, economies that rely on voluntary exchange have produced more prosperity and freedomg for its citizens than central controlled economies.
• D. A neccesary condition for a system of voluntary exchange to be used to organize an economy is that prices be allowed to fluctuate according to supply and demand, i.e. no central authority interferes in people buying and selling in the market.

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