Which of the following best describes a 'command' ('planned') economy?

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BlackTom AI · Accepted Answer

The question asks: Which of the following best describes a 'command' ('planned') economy?

Given information shows the correct option is: c. An economic system where the government makes all of the economic decisions

First, the concept of a command or planned economy is that centralized authorities—typically the government—determine what to produce, how to produce, and for whom to produce. Prices, production targets, and resource allocation are set by a central plan rather than by market forces. This description aligns with the statement in option c.

If we imagine possible competing descriptions (even though the exact options aren’t listed here), other common possibilities might include:
- A description suggesting minimal government intervention and market-driven decisions would be characteristic of a free market or capitalist system, not a command economy. This would make such an option incorrect for describing a command economy.
- A description suggesting a mix of government planning with private enterprise would describe a mixed economy, which again does not fit the essence of a fully planned economy.
- A description focusing on private property and price signals as primary means of allocation would mischaracterize a command economy, where price signals are typically controlled or overridden by a central plan.

In summary, the core attribute of a command/planned economy is centralized decision-making by the government regarding production and allocation of resources. Any option that emphasizes market mechanisms, private ownership, or limited government control would be inaccurate against this definition. Since the provided correct option explicitly states that the government makes all economic decisions, it correctly captures the defining feature of a command economy.

MUF0061 Economics Unit 1 - Semester 2, 2025 Video and Questions – Economic Systems (5 - 7 minutes)

Which of the following best describes a 'command' ('planned') economy?

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