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A frequently cited risk of a mixed economy, if the government fails to act decisively, is that the:
APrivate sector grows disproportionately and the system resembles capitalism
BPublic sector takes over all production and bans private firms
CPrice mechanism is permanently abolished by statute
DEconomy automatically converts into pure socialism
Answer & Solution
Correct answer: A. Private sector grows disproportionately and the system resembles capitalism
1. A mixed economy must balance the public and private sectors.
2. The unit warns this balance is hard to maintain.
3. Without strong government initiative the private sector grows out of proportion.
4. The system then resembles capitalism with its disadvantages, making A correct; the other options describe outcomes the text does not support.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 1 Unit II "Basic Problems of an Economy and Role of Price Mechanism", p.8_
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