Centrally Planned Economy – Definition
Centrally planned economy is referred to as that type of economy or economic system where the important decisions regarding how to produce, what to produce and for whom to produce are taken by a central authority which is generally the government makes the decisions regarding the manufacturing and distribution of products.
Centrally planned economies are also known as command economies, where the prices are controlled by a centrally managed bureaucracy. The theory behind centrally planned economy is that the government will take control of the means of production and run the economy with fair distribution to all.
Examples of Centrally Planned Economy
For instance, if it is found that a product that is vital for the growth and well-being of the economy, health service, or education is not manufactured in the sufficient amount, the government might attempt to persuade people to produce the requisite amount of that product, or the government can take the hold and manufacture those goods and services.
In a distinct reference, if people in the economy get a small amount of share of the goods and services manufactured in the economy, then the government might interfere and attempt to acquire a fair and equitable allocation of the goods and services for all.
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