A market economy facilitates the free exchange of resources among economic actors. In this system, market participants' interactions dictate investment, production, and distribution. Supply and demand, rather than government intervention, determine prices and the allocation of goods and services. This differs from a centrally planned economy, where a central body, usually the government, makes these decisions.
| Option | Description | Correct? |
|---|---|---|
| Market economy | A system where decisions are driven by market forces. | Yes |
| Centrally planned economy | Decisions made by a central authority. | No |
| Aggregate demand-based economy | Focus on total demand for goods and services. | No |
| Aggregate supply-based economy | Focus on total supply of goods and services. | No |