Why is the American economic system best described as modified capitalism?

• A. Because it is based solely on traditional customs and barter.
• B. Because it operates entirely without any government involvement.
• C. Because it combines private ownership and free markets with government intervention and regulation.
• D. Because all resources are owned and allocated by the government.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definition of capitalism, which is an economic system characterized by private ownership of resources and the operation of free markets with minimal government interference.
2. Step 2: Recognize that pure capitalism implies little to no government intervention in economic activities, allowing supply and demand to determine prices and resource allocation.
3. Step 3: Identify that the American economic system includes significant government roles such as regulation, taxation, and provision of public goods, which modify the pure capitalist framework.
4. Step 4: Analyze the term 'modified capitalism' as a system that blends private ownership and free market principles with government intervention to correct market failures and promote social welfare.
5. Step 5: Conclude that the American economic system is best described as modified capitalism because it combines private ownership and free markets with government intervention and regulation, rather than being purely traditional, purely free-market, or fully government-controlled.