There are various ways in which individual economic units can interact with one another. Three basic ways may be described as the market system, the administered system and the traditional sys tem.
In a market system individual economic units are free to interact among each other in the market place. It is possible to buy commodities from other economic units or sell commodities to them. In a market, transactions may take place via barter or money exchange. In a barter economy, real goods such as automobiles, shoes, and pizzas are traded against each other. Obviously, finding somebody who wants to trade my old car in exchange for a sailboat may not always be an easy task. Hence, the introduction of money as a medium of exchange eases transactions considerably. In the modern mar ket economy, goods and services are bought or sold for money.
An alternative to the market system is administrative control by some agency over all transactions. This agency will issue edic
A. rapid speed of transactions
B. misunderstandings
C. inflation
D. difficulties for the traders
Lower taxes would spur investment and help economic growth.()
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