Leomar P.

Castillo AC_IntBus
46354 11:00 AM - 12:00 PM (MWF)

Activity 2

1. Free market economies stimulate greater economic growth, whereas state-directed

economies stifle growth. Discuss.
Free market imposes less restrictions and allows the businesses to be flexible and
efficient. State-directed economies are prone to corruption and red taping which impairs
the ability of businesses to grow.

2. A democratic political system is an essential condition for sustained economic progress.

Discuss.
A democratic political system allows both businessmen and public to participate in policy
creation and execution of those policies to make both ends meet. It creates a win-win
situation for both business owners and consumers by ensuring that their respective sides
will be heard.

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

a. Under Chavez's leadership, what kind of economic system is being put in place in
Venezuela? How would you characterize the political system?
Chavez implemented a command market system. The political system is characterized by
corruption and monarchical. Chavez almost had full control over the legislative as well as
the judiciary.

b. How do you think that Chavez's unilateral changes to contracts with foreign oil
companies will affect future investment by foreigners in Venezuela?
Foreign investors will most likely not invest in Venezuela and transfer all their current
investment to a country where they can exercise freedom and not be subject to a very
oppressive government.

c. How will the high level of public corruption in Venezuela affect future growth rates?
Future growth rates will most likely come spiraling down.

d. In your estimation, what is the long-run prognosis for the Venezuelan economy? Is this
a country that is attractive to international business?
Unless drastic changes are made in the government of Venezuela, this country will still
be one of the most corrupt and poorest nations in the whole world. Given the situation,
the said nation is not attractive to international business.