The power of the market is controlled by a system called the command principle which signifies that there is a large enough number of people to make the system work. In this type of system everyone receives commands from someone higher up than them and can work with anything from large corporations and small companies, to even families. One example of this type of economy used in Free to Choose is the The Soviet Union. The results of the Soviet Union failed because no society can operate entirely on the command system because there will always be self-motived people who will not follow the norm as human nature will no allow it. On the other hand, there are not societies that will use fully a voluntary cooperation because that too goes against human nature. A mix between the both types of market systems need to be established to be able to see success in the world economy and be able to form a stable trade with currency. The example of pencil manufacturing gives a wonderful example of the mixed economy: each part of the pencil is needed to make the end product and without one material part it wouldn’t be possible to make the end product. In the example when one of the material parts prices went up the price of the overall pencil went up too. This shows the importance of the price systems and everything that needs to happen to be able to have successful businesses and a stable world economy. The price system when establish provides three fun...
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...ey even issued certificates of deposits based on tobacco. Cigarettes functioned as a form of money during World. It didn’t and hasn’t matter what form the economy used as currency as long as everyone involved agreed in what the form of currency was. This is very important as we – the economy and government – decide what the value is for our currency, and as a result we are able to influence other markets. Friedman explained five truths about the influence of currency and inflation – (1) inflation is caused by a more rapid increase in the money supply; (2) our current world government determines the quantity of money; (3) the cure for inflation is to lower the rate of monetary growth; (4) it takes time for inflation to develop; and (5) many unpleasant side effects of the cure are often unavoidable. We can see that these are economic truths in our monetary policies.
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