Reading 14: Economic Growth

LOS a: Discuss the preconditions for economic growth

1.Which of the following most completely identifies the institutions in an economy that are necessary for markets to be effective?

A)   Property rights and monetary exchange.

B)   Property rights and a supporting legal system.

C)   Monetary exchange and a central banking system.

D)   A legal system and a central banking system.

The correct answer was A)

For markets to be effective, property rights and monetary exchange are required. If property rights are properly established and enforced, people will be assured that government will not confiscate their savings and investments. Monetary exchange provides for the efficient exchange of goods and services.