Question

Evaluate free market solutions to a contemporary macroeconomic issues, including deficits and debt, international trade, retirement security, etc.

1. what is a free market solution?

2. Select a minimum of one contemporary macroeconomic issue relating to one of the following: deficits and debt or international trade or retirement security to debate.

3. Debate the pros and cons of the free market solution.

Answer 1

A free-market economy is an economic system in which the decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand. in such type of economy, any kind of misadjustment will be there will be adjusted by itself. Private property, Freedom of choice, Motivation of self-interest, competition, the limited government are the basic characteristics of a free market economy. In a free-market economy, the law of supply and demand decides and regulates production and labor. Companies sell goods and services at the highest price consumers are willing to pay while workers earn the highest wages companies are willing to pay for their services. so the market, as well as the economy, is self-sustainable without the intervention of government. the contemporary macroeconomic issues like unemployment, budget deficit, inflation deficit debt, and international trade with retirement security can be solved in a flow process. if there is any kind of disturbance noticed then the economy itse\lf reacted to go for the upliftment of that particular segment. fro example if there is unemployment then it can be solved by increasing the demand or by reducing structural unemployment. Deficit and international trade can be managed by increasing sell or export, more investment through more saving by reducing consumption that leads to a high production so the cost of production will less and there will be surplus to reduce the deficit. retirement security can be facilitated with a pension or a huge amount in terms of provident fund.

b) A free-market solution that sole basis for the economic system, without government intervention with a key feature of the absence of coerced (forced) transactions or conditions on transactions.

c) The trade deficit is a macroeconomic issue related to a deficit in international trade. it is neither good or bad. if we will see it from a positive perspective it represents a strong economy with a high demand for imported goods. but on the other side, it also represents the production capability of a country is poor to enhance the export capability. In a free market, it will be simply adjusted by decreasing import and increasing export.

d) Free market economy is having advantages with disadvantages:

Advantages:

1. Absence of Red Tape: due to the absence of bureaucracy there is less cost of administrative cost.

2. Freedom to Innovate: there is no limitation for innovation make the producer more enthusiastic about the market competition

3. Customers Drive Choices: it took the customer priority and products are more discriminated against according to the choice of a customer.

Disadvantages:

1. Limited Product Ranges: this type of market can't operate in a wide range of products due to fear of conflict.

2. Dangers of Profit Motive: when there is no limitation from the government side there is a chance of quoting a high price for a product with a high-profit motive.

3. chances of market failure: the great example of market failure is the 1930's great depression. where the market could not decide about its further action.