1.

Free-market economies allow businesses to compete at the market without too much
restrictions and that make them more competitive against other firms thus making more
profits. State-directed economies is the opposite, where firms are like being choked and
that resources and income are circulated only in the government.

2. I think it depends on the citizens’ response to a political system. Western countries might
say it is essential because it works for them but there are also many countries that are
progressing through a different political system (a good example is China).

3. Read the Country focus on Chavez's Venezuela (pdf file is uploaded in this activity), then
answer the following questions:

a. A command economy wherein the central government makes all economic decisions. The

country is under a democratic political system wherein people decide who will be their
leader.
b. I think Venezuela’s future will be facing a higher business risk particularly the downside
risk of investment and that the investors would likely see the country as an unattractive
for investing.
c. It will put Venezuela’s growth rate at a higher risk of decline because corruption
discourages investment (especially foreign.
d. As I have said earlier, investors would find it unattractive for trade and investment
however with the increasing demand in oil resources, maybe the said country can still
bounce back.