When we refer to a political system as a two-party system we mean that

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In a two-party system, two major political parties dominate politics within a government. One of the two parties typically holds a majority in the legislature and is referred to as the majority or governing party while the other is the minority or opposition party. This does not mean that only two parties exist, but rather that only two parties have a realistic chance of winning a majority of seats or positions.

When We Refer to a Political System as a Two-Party