The correct answer is:
social market economy.
soziale Marktwirtschaft.
Independent study resource, not a BAMF website. Translations are study aids; the exam is in German.
Quick explanation
Germany’s economic system is called the social market economy.
Why is this correct?
It combines a free market with social balance provided by the state; the GDR had a planned economy.
Background
Germany’s economic system is called the social market economy. Companies produce and sell freely, and prices are set by supply and demand. But the state ensures social balance, for example through social insurance, protection against dismissal, the minimum wage and rules for fair competition. Ludwig Erhard, the first economics minister of the Federal Republic, is considered the father of the social market economy.
Why are the other answers wrong?
In a planned economy or a centrally directed economy, the state decides what is produced and what it costs – as in the GDR. A “free central economy” does not exist; free and centrally directed do not go together.
Memory tip
Market + social balance = social market economy.
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