In a pure market economy, the role of government is limited to provision of :i) a basic legal and institutional structure.ii) intervention in the allocation of resources in some areas of the economy. iii) redistribution of income.iv) stabilization of economic conditions generally. Which of the above points is true?

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Quizplus · Accepted Answer

In a pure market economy, government intervention is minimal and limited to providing a basic legal and institutional framework that enables private parties to conduct transactions and enforce their contracts. The government does not intervene in the allocation of resources, redistribute income or stabilize economic conditions, as market forces are expected to perform these functions efficiently. Therefore, only option i) is true in a pure market economy.

In a Pure Market Economy, the Role of Government Is