Question

Benjamin works at an automobile manufacturing company. The country in which the company operates is facing a heavy trade deficit because exports have dropped substantially. The government has ordered all automobile manufacturers to solely build luxury sedans for the purpose of export, because it is the best-selling product. The government also suggested a less than competitive price for cars being sold in the international market. Which kind of economic system is Benjamin facing in his country?

Answer 1

Answer:

The correct answer would be Command Economic System.

Explanation:

Economic systems define the control of the government on the economic resources and the institutions of the country. There are four major economic systems. One is Traditional Economic System, other is Command Economic System, third one is Market Economic System and the fourth one is Mixed Economic System.

Command Economic System is an economic system in which the central powers are with the government. Government regulate the decisions of economy as well as of the institutions. In this type of economy, the government dictates the companies to do whatever the government says and thinks is the best for the country's economy.

So in this question, government thinks that the best way to overcome the trade deficit is to increase the exports of the Sedan cars at a competitive price in the international market without seeking any advice from the automobile manufacturers. This type of economic system is called the Command Economic System.