A country’s economic system is made up of structures and processes that can be used to distribute its resources and trade goods and services (conduct its commercial activities). The economic system can regulate five factors of production involving labor, capital, entrepreneurs, physical resources, and information resources. The three types of economic systems are the market economy, centrally planned economy, and the mixed economy.
Capitalism, which falls under the market economy, is an economic system where a country’s production, the circulation of goods and services for profits, are controlled by private owners. Capitalism allows citizens to own businesses and acquire wealth, therefore …show more content…
Firstly, the rate of unemployment wouldn’t rise because of the recession. Secondly, since recession leads to clearing up the high supply demand in the economy, the economy would be redesigned to avoid this trouble as well as stopping the fear that comes with recessions and depressions.
Without self-regulation, there are many positive and negative effects on the economy. However, if we combat the negative aspects of recession (stop the rise of unemployment, stop the fear and annihilation of assets) our goal to protect investments from recessions and depressions will be solved. Flexible wages and prices are an important role in maintain a self-regulating economy as the economy will move towards long run equilibrium.
The boom and bust cycle is the economy heating up and rapidly cooling down. This is the cause of inflations, recession, depressions, bubbles etc. In terms of the economic bubble, the economy could be designed in a way where the price of an asset doesn’t rise high above its actual real value. The government plays a key role in correcting these economic problems since their policies can help alleviate the problem. For example, if the economy were to go in a recession the businesses would start to decline, resulting in consumers not buying, and banks not offering loans. Ultimately, it is up to the government to restore the economy though financial and economic …show more content…
Therefore, the idea of economic resilience is based on the concept of the economy being able to resist that certain shock, and being able to quickly adapt to the previous level of growth or even superior to that. An economy can be designed to be resilient if the country itself is resilient. For instance, a few factors that make a country resilient are young workers who have more working experience meaning they have better tendencies to deal with financial crises. Also, countries with greater diversity proved they can eradicate severe recession. Ultimately, to avoid any global financial crises, trying to build a more resilient economy will cause it to be more opposing towards any financial or natural