Mixed economic system — practice question

Source text: Changes in the economy of Montenegro Montenegro is a European country where the private sector has grown in importance. By 2020, 90% of state-owned firms had been privatised. All commercial banking, telecommunications and aluminium production has moved into private ownership. The country's banks now possess more computers, more employees and more office buildings. In most years, Montenegro receives three times as many tourists as the size of its resident population. Tourism is a highly competitive market. Holiday demand is price-elastic, which affects firms' pricing decisions in the industry. The share of workers in tourism and other tertiary sector industries has risen. In 2020, 75% of Montenegro's labour force were employed in the tertiary sector. Some workers in the primary sector assist with growing and exporting oranges. A minimum price has been proposed for oranges and some other crops. Movements in the price of a country's exports can influence both the trade in goods and services balance and the current account balance of its balance of payments. Table 1.1 shows selected information on the balance of payments of six East European countries in 2020. A country's position in international trade is affected by the amount and pattern of consumer expenditure. Privatisation has influenced consumer spending. The shift to the private sector has changed investment, the number of workers employed and competition in those industries. It has also changed firms' aims, prices and how quickly they react to changes in consumer demand. In 2020, Montenegro had very low inflation. It was anticipated that this might become deflation. A drop in the price level could affect the country's output, employment and balance of payments.