Market Economy
 |
Definition of 'Market Economy'An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses and there is little government intervention or central planning. This is the opposite of a centrally planned economy, in which government decisions drive most aspects of a country's economic activity. |
|
Investopedia explains 'Market Economy'Market economies work on the assumption that market forces, such as supply and demand, are the best determinants of what is right for a nation's well-being. These economies rarely engage in government interventions such as price fixing, license quotas and industry subsidizations.While most developed nations today could be classified as having mixed economies, they are often said to have market economies because they allow market forces to drive most of their activities, typically engaging in government intervention only to the extent that it is needed to provide stability. Although the market economy is clearly the system of choice in today's global marketplace, there is significant debate regarding the amount of government intervention considered optimal for efficient economic operations. |
Related Definitions
Articles Of Interest
-
State-Run Economies: From Public To Private
Find out how former Iron Curtain countries used private enterprise to join the world financial markets. -
What Is An Emerging Market Economy?
Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors. -
What Is The World Trade Organization?
The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it? -
Who determines interest rates?
In countries using a centralized banking model, interest rates are determined by the central bank. In the first step of interest rate determination, the government's economic observers create ... -
Why The Consumer Price Index Is Controversial
Find out why economists are torn about how to calculate inflation. -
Predict Inflation With The Producer Price Index
Find out how the PPI can be used to gauge the overall health of the economy. -
Leading Economic Indicators Predict Market Trends
Leading indicators help investors to predict and react to where the market is headed. -
Austerity: When The Government Tightens Its Belt
When a government tightens its belt in tough economic times the entire nation feels the squeeze. -
Will Quantitative Easing Be Japan's Savior?
The quantitative easing program, recently announced by the new governor of the Bank of Japan, Haruhiko Kuroda, is for a cash infusion of $1.4 trillion by the end of 2014. Will it help the Japanese ... -
Inspecting A Country's Debt
Tensions over just how to handle debt are pitting the rich world against the developing world like never before.
