Which of the following best describes an economic system?

• A. A method for measuring a country's gross domestic product (GDP).
• B. A government policy aimed at controlling inflation.
• C. A set of rules and institutions that determine how a society allocates its scarce resources to produce and distribute goods and services.
• D. A financial market where stocks and bonds are traded.

Answer: (C)

Verified step by step guidance

1. Understand the concept of an economic system: It refers to the framework or structure within which a society organizes the production, distribution, and consumption of goods and services.
2. Recognize that an economic system involves rules and institutions that guide how scarce resources are allocated among competing uses.
3. Differentiate an economic system from other economic terms such as GDP measurement, government policies, or financial markets, which are specific tools or components within the broader economy.
4. Identify that the correct description of an economic system is 'A set of rules and institutions that determine how a society allocates its scarce resources to produce and distribute goods and services.'
5. Conclude that this definition captures the essence of how societies manage economic activity, distinguishing it from other options that describe specific economic indicators or markets.