Question

We have a mixed economy because (LO1) a) we produce guns and butter b) we consume domestically produced goods as well as imports c) we consume both goods and services d) there is a private sector and a public sector

Short answer

The correct reason for having a mixed economy is d) There is a private sector and a public sector, as it includes both private and public sectors in the economic system.

Step-by-step solution

Understand what a mixed economy is

A mixed economy is an economic system that combines elements of both market (capitalist) economies and planned (socialist) economies, where resources are allocated through a mixture of market forces and government intervention. In simple terms, a mixed economy has both a private sector and a public sector.

Analyze the given options

Let's analyze each option to determine which correctly represents the characteristics of a mixed economy: a) We produce guns and butter: This option represents an economy that produces both military goods (guns) and civilian goods (butter). This is not the main characteristic of a mixed economy. b) We consume domestically-produced goods as well as imports: This option is true for many economies, but it represents more of a characteristic of global trade and not necessarily the main characteristic of a mixed economy. c) We consume both goods and services: This statement refers to the consumption of goods and services, which occurs in any economy – whether it be a market, planned, or mixed economy – so this is not the main characteristic of a mixed economy. d) There is a private sector and a public sector: This option precisely defines a mixed economy, as it includes both private and public sectors in the economic system.

Choose the correct answer

Based on the analysis of each option, the correct answer is: d) There is a private sector and a public sector