Centrally Planned Economy  Government plans every aspect of the economy, and maintains constant control over it  Also known as public enterprise because of its reliance on public ownership of production, and government decision-making on economic matters

Central Planning in Theory Three basic economic questions 1.What to produce Committees of economic experts must balancegovernment policy and the needs of the people 2.How to produce goods Govt’ policy can influence production decisions (i.e., a goal of full employment could dictate labour intensive methods) 3.How to distribute goods Govt’s distribute goods according to policy, as well as according to scarcity All priorities/plans are set by govt’

Central Planning: Advantages and Disadvantages Advantages  Planning encourages high rates of economic growth.  Planning helps to reduce wastage of resources.  The distribution of income is more equal.  Essential goods are produces before less essential goods.  Planned economies do not suffer from unemployment and inflation related to business cycles.

Disadvantages  Planned economies are bureaucratic nd inflexible.  There is little incentive for efficient management  The system stifles individual effort.  Freedom of choice is restricted.  The quality, quantity, and variety of goods are limited.