What describes a command economy?

What describes a command economy?

• A. Free market for goods and services
• B. All production factors are state-controlled
• C. Decentralized decision-making
• D. Minimal government involvement in the economy

Answer: (B)

A command economy is characterized by the state or government controlling all or most of the factors of production and making decisions regarding the economy. This type of economic system mandates that the government plans and manages resources, production, pricing, and distribution of goods and services. In this system, the central authority effectively determines what is produced, how much is produced, and how resources are allocated, which contrasts sharply with market-based economies where individual consumers and producers make these decisions based on supply and demand. The choice that indicates all production factors are state-controlled accurately reflects this centralized approach. The other options highlight features typical of market economies or characterize less interventionist approaches, which are not indicative of a command economy. For example, a free market for goods and services points to an economy where decisions are driven by private individuals or businesses, while decentralized decision-making suggests a system where decision-making authority is spread out rather than concentrated at a central level. Furthermore, minimal government involvement aligns more with laissez-faire economics, distancing from the principles of a command economy, where the government's role is predominant in economic affairs.

A command economy is characterized by the state or government controlling all or most of the factors of production and making decisions regarding the economy. This type of economic system mandates that the government plans and manages resources, production, pricing, and distribution of goods and services.

In this system, the central authority effectively determines what is produced, how much is produced, and how resources are allocated, which contrasts sharply with market-based economies where individual consumers and producers make these decisions based on supply and demand. The choice that indicates all production factors are state-controlled accurately reflects this centralized approach.

The other options highlight features typical of market economies or characterize less interventionist approaches, which are not indicative of a command economy. For example, a free market for goods and services points to an economy where decisions are driven by private individuals or businesses, while decentralized decision-making suggests a system where decision-making authority is spread out rather than concentrated at a central level. Furthermore, minimal government involvement aligns more with laissez-faire economics, distancing from the principles of a command economy, where the government's role is predominant in economic affairs.