What are the three main types of economic systems used by countries today?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Your answer to this question may depend on what your teacher has told you.  Because this asks about economic systems “used by countries today,” the answer is somewhat open to opinion.  I will give my answer and one other answer that some teachers might want to see.

In basic economics courses, we tell students that there are three economic systems in the world.  These are command economies, traditional economies, and market economies.  Each of these types of economy answers the three fundamental economic questions (what to make, how to make it, for whom to make it) in different ways.  In a command economy, the government determines the answers to these questions.  In a traditional economy, the answers to these questions are determined by tradition—by the way things have always been done.  In a market economy, consumers determine the answers to the three fundamental economic questions.  Your teacher may expect you to give these three systems as your answer.

If I were answering this question, however, I would not say that the traditional economic system is “used by countries today.”  I cannot think of any country in the world whose entire economy is based on tradition.  Instead, I would say that the three economic systems are command, market, and mixed (and, really, almost every country in the world has a mixed economy).  True traditional economies have no markets.  They use barter and trade, not money and buying and selling.  There are places in the world where such systems are used, but there are no entire countries where this is true.

Instead, I would mention the mixed economic system.  This is a system that combines aspects of command and market economies.  For example, in the United States, we generally have a market economy.  However, the government also answers the fundamental economic questions to some degree.  It tells us that we have to produce education for every child of a certain age.  It tells us that we cannot produce things using child labor.  In these ways, it does not simply let the market determine what is done. 

So, it is not clear which of these answers you should use.  You might want to check your notes or your textbook.  Either of them could possibly be correct, but it will depend on what your teacher expects to see.

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