The factor which places this nation in the transitioning category is shifting from a planned a free-market economy. The second option is correct.
What is free market economy?
Free market is an unregulated system of economic exchange, in which taxes, quality controls, quotas, tariffs, and other forms of centralized economic interventions by government either do not exist or are minimal.
The nation is in transitioning category due to it's shifting from a planned a free-market economy.
Thus, second option is correct.
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