The transition to a market-oriented economy characterized by rising unemployment and higher prices suggests that
A) government must continue to centrally plan all resource allocations to production.
B) a social safety net including unemployment compensation, and food, clothing, and housing subsidies for those in need will be politically popular.
C) government must set wages, prices, and interest rates.
D) government must continue to centrally plan the distribution of all output into consumption.

Question

Quizplus · Accepted Answer

The rising unemployment and higher prices suggest a need for a social safety net to support those in need. This would be politically popular and help alleviate some of the negative impacts of the transition to a market-oriented economy. Central planning of resource allocation, wages, prices, and interest rates is not likely to be effective in addressing these issues.

The Transition to a Market-Oriented Economy Characterized by Rising Unemployment