A Level Economics AQA Practice Exam

What does deregulation entail?

1. The introduction of more governmental restrictions on businesses

2. The lifting of government restrictions on business and industry

3. The establishment of new regulatory bodies

4. Full government control of all industry activities

The correct answer is: The lifting of government restrictions on business and industry

Deregulation refers to the process of reducing or eliminating government restrictions and regulations that control how businesses operate. By lifting these regulations, deregulation aims to encourage economic activity, enhance competition, and drive innovation within various sectors of the economy. When businesses face fewer barriers imposed by regulatory bodies, they often have greater flexibility to respond to market demands, improve efficiency, and potentially lower prices for consumers. In the context of economics, deregulation is often viewed as a way to stimulate growth by fostering a more competitive business environment. It can be applied across different industries, such as telecommunications, transportation, and energy, where regulation may have previously restricted the market's responsiveness to consumer needs. This process contrasts sharply with the incorrect options. Introducing more governmental restrictions would inhibit business activity and market dynamics. Establishing new regulatory bodies could lead to increased oversight rather than removing it. Lastly, full government control of all industry activities suggests a command economy, where the government manages production and distribution, which is fundamentally opposed to the principles of deregulation.