Author Question: Is the United States a command economy, a laissez-faire economy, or neither? Explain. What will ... (Read 251 times)

renzo156 · **on:** Jun 29, 2018

Is the United States a command economy, a laissez-faire economy, or neither? Explain.

What will be an ideal response?

Question 2

Assume that a union representative argues that the social security tax is essentially paid for completely by the worker in the form of a lower wage equal to the amount of the tax.

If this person were correct what is implicitly assumed to be the shape of the labor supply curve and why? Is this a reasonable assumption? Why or why not?

momo1250 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The United States is neither a command economy nor a laissez-faire economy. It is more accurate to describe it as a mixed economy. The U.S. basically has a free market economy, but the government is a large purchaser of goods and services and also produces some goods and services as well. In addition, the U.S. economy has significant amounts of government regulation of business.

Answer to Question 2

The implicit assumption is that the labor supply curve is perfectly vertical. That is workers will not change their labor supply decisions when wages change. This appears unlikely because it argues that workers do not respond to changes in incentives which appears unlikely.