Question

Which statement explains a planned economy?
The state determines prices and allocates resources. The means of production are owned by all the people. The means of production are controlled by individuals, not the government. The prices of products and allocation of resources are determined by market forces.

Answer 1

The first one is correct. In a planned economy, also known as a command economy, the state determines prices and allocates resources.

Answer 2

The correct answer would be option A, The state determines the prices and allocates resources.

The above mentioned statement explains the planned economy.

Explanation:

An economic system, in which the economy(including investment, capital and allocation of capital goods) is governed by a predefined economic and production plans, is called as the Planned Economy.

The system of planning in this economic system can either be centralized, decentralized or participatory.

This economic system is regulated by the Government. All decisions about the capital, lands, buildings, machinery, or other resources are taken by the government.

The production, prices, distribution, etc of the products or services are regulated centrally by the government.

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