Question

Which of the following is true about a capitalist economy?

Options

• Large inequalities of income exist.

• Economic fluctuations are widely seen.

• Both large inequalities of income exist and economic fluctuations are widely seen.

• Neither large inequalities of income exist nor economic fluctuations are widely seen.

Answer 1

Both large inequalities of income exist and economic fluctuations are widely seen

Explanation:

In a capitalist economy, large inequalities of income exist because wealth tends to accumulate in the hands of a few rich individuals, leading to income disparity. Additionally, economic fluctuations are widely seen due to unplanned production causing over-production or under-production, which leads to market instability. Thus, both large income inequalities and economic fluctuations are characteristics of a capitalist economy.