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In a capitalist economy, which mechanism does the textbook describe as the heart of the system?
ACentral planning by the state
BThe price mechanism of the market
CThe law of inheritance of property
DPublic ownership of resources
Answer & Solution
Correct answer: B. The price mechanism of the market
1. Among the features of capitalism the textbook lists private ownership, freedom of choice, the profit motive, free competition and the price mechanism.
2. It states that the price mechanism is the heart of any capitalist economy, working through the market forces of demand and supply.
3. Central planning is instead a defining feature of a socialist economy, which the book also calls a planned or command economy.
4. Public ownership likewise belongs to socialism, while inheritance is a separate feature of capitalism rather than its central mechanism.
_Source: TN HSC Class 12 Economics (Samacheer Kalvi, Govt of Tamil Nadu), Ch 1 "Introduction to Macro Economics", §1.7.1_
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