Answers

1) For a country to sustain long term economic growth, the business environment needs to be
conducive to innovation and entrepreneurial activity. Innovation and entrepreneurship must
be free from corruption and the property must be protected. Bribery is legally wrong in the
economy as it will interrupt the economic growth process of a country. Strong legal
protection of property rights is another requirement for a business environment conducive
to innovation, entrepreneurship, and economic growth. If the property rights are not being
protected, individual or companies will avoid from the situation. Anticorruption is very
important to an economy. Without anti-corruption, it can lead to economic growth, foreign
direct investment and international trade falls.

1) Free market economy is an economy where the business owned privately. State direct
economy is businesses are state owned, and so have little incentive to control costs and
be efficient. In free market economy, it would help the business of an entrepreneur to
maximize their profits through their creativity. Thus, it will help the economic growth to
increase. In a free market economy, the productions of goods and services is determined
by supply and demand. There are no limitations on supply when working under free
market economy. But there is also a drawback in free market economy, which is
monopoly could take place. It will derive to a competition in the economy so the
government will help the businesses to enhance economic growth and efficiency. A state
direct company is under controlled by the governments which means all their
productions is held by the government. This would lead to lack of competition and
effiency in business.

2) Democratic system is political system in which government is by the people, exercised

either directly or through elected representatives. Democracy is connected with the
increasing of human capital, lower inflation, lower political instability, and higher
economic freedom. However, there some totalitarian regimes has sustained economic
progress such as Hong Kong, Singapore Taiwan and South Korea. But since democracy
shows the people have the rights to participate in the economy, democracy system may
be essential to the economic growth.

3) Corruption is always bad because it would reduce the economic growth rate of a
country. Thus, corrupted country will show negative effects such as the investment of a
country would be lower, foreign and domestic businesses will be reduce due to the slow
economic growth. Then lower the investment indicates that the economic is not in a
good condition. However, in the Foreign Corrupt Practices Act limits corruption in the
U.S, it is illegal to bribe a foreign government official in order to obtain or maintain
business over which the foreign official has authority. All publicly traded companies
must keep detailed records so that it is clear whether a violation of the act has occurred.
Facilitating or expediting payments to secure the performance of routine government
actions are permitted.