Market Economy

AAA

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 TERMS
  1. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  3. Plunge Protection Team - PPT

    A colloquial name given to the Working Group on Financial Markets. ...
  4. Laissez Faire

    An economic theory from the 18th century that is strongly opposed ...
  5. Price Fixing

    Establishing the price of a product or service, rather than allowing ...
  6. Emerging Market Economy

    A nation's economy that is progressing toward becoming advanced, ...
Related Articles
  1. Who determines interest rates?
    Investing

    Who determines interest rates?

  2. State-Run Economies: From Public To ...
    Personal Finance

    State-Run Economies: From Public To ...

  3. What Is An Emerging Market Economy?
    Economics

    What Is An Emerging Market Economy?

  4. What Is The World Trade Organization?
    Economics

    What Is The World Trade Organization?

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center