Characteristics of the Command Economy
A command economy is where economic decisions are planned out in detail by a central government authority. The plan is implemented through laws, regulations and directives. Businesses follow production and hiring targets instead of individually and freely responding to the laws of supply and demand. Characteristics of a Command Economy
A modern centrally planned economy can be identified by the following three characteristics: The government creates a central economic plan for all sectors and regions of the country. It typically starts with a five-year plan to set the overriding economic goals. This is broken down into shorter-term plans to convert the goals into actionable objectives. The goal of the five-year plan is to generate robust economic growth, increase production efficiency and best utilize scarce resources. For the most part, a command economy needs a political system that is also centrally planned. The government allocates all resources according to the plan that they have implemented. The goal is to use the nation's capital, labor and natural resources in the most effective way possible. This pretty much eliminates unemployment by promising to use each person's skills and abilities to their highest capacity. The central plan sets the priorities for production of all goods and services. The goal is to supply enough food, housing and other basics to meet the needs of everyone in the country. In addition, it may have other priorities, such as mobilizing for war or increasing the nation's economic growth. The government creates the laws that regulate economic activity. These include regulations, directives and wage/price controls to implement plan that they have developed. The government owns a monopoly business in industries deemed important to the goals of the economy. This usually includes finance, utilities, and automotive. There is no domestic competition in these industries.
Please join StudyMode to read the full document