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Finance & Accounting
Pages 3 (753 words)
The economies of Europe and that of America experienced a financial crisis because of too much liberalization of their economies.The European Union and the United States government advocated for a free market economy…
This is because it is used to refer to a variety of issues in an economy. For example, a free market economy is used to refer to a market whereby there isn’t any government regulation (Atrill and Mclaney, 2012). In other circumstances, a free market economy refers to a market where by the prices of goods and services are controlled by the laws of supply and demand. A free market economy can also be used to refer to a market which does not have a monopoly. Proponents of a free market economy have made a mistake in advocating for an economy which is free of regulation as the best method of economic governance. This is because the free market economy failed to prevent the occurrence of the financial crises in Europe and the United States. It is important to denote that markets is a social institution, and therefore markets cannot act, but it is the behavior of the people within the market that will affect the market under consideration (Atrill and Mclaney, 2012). It is therefore important to regulate the behavior of people so that they do not destroy the economy of a state. For instance, the economic crisis in America was precipitated by the failure of the mortgage system in America (Bhimani, 2012). People took too much money for mortgages, leading to a rise in value of properties. ...
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