Free Market Economy

A free market economy is a purely capitalist venue that is run on the law of supply and demand without little or no government intervention. A key feature of this economy type is the absence of coerced transactions or conditions on transactions, characterized by private ownership, freedom of choice, self-interest, optimized buying and selling platforms, competition, and limited government intervention. As the profit drives all commerce and forces businesses to operate as efficiently as possible to avoid losing market share to competitors, it also optimizes efficieny and innovation.

Interest Rates in Free Market Economy

  • In a free market economy, interest rates are determined by the amount of savings and new wealth created
  • Rates go lower as savings increase;  Rates increase as savings decrease (encouraging more savings)
  • Healthhy economies have stable interest rates - that depend on how much new wealth is created