Unit 2 Economic Systems SECTION 3 CENTRALLY PLANNED

Centrally Planned Economy An economy that is PLANNED out by the CENTRAL GOVERNMENT �The

TWO Kinds of Centrally Planned Economies �Command Economy The government doesn’t care what the

TWO Kinds of Centrally Planned Economies �Controlled Economy (Market Socialism) The government has to

Disadvantages of a Centrally Planned Economy COMMAND ECONOMY BIG TIME Disadvantages CONTROLLED ECONOMY LESSER

Disadvantages of a Centrally Planned Economy �Disadvantages Lacks economic growth � No reward for

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Unit 2: Economic Systems SECTION 3: CENTRALLY PLANNED ECONOMIES

Centrally Planned Economy An economy that is PLANNED out by the CENTRAL GOVERNMENT �The bureaucracy decides WHAT is to be made �The bureaucracy decides HOW things are to be made �The bureaucracy decides WHO gets the things that are made

Centrally Planned Economy An economy that is PLANNED out by the CENTRAL GOVERNMENT �The government owns Land Capital Labor (well, not owns it, but controls it!)

TWO Kinds of Centrally Planned Economies �Command Economy The government doesn’t care what the people think � There is no democracy = no vote � No way for the people to control the government The government gives COMMANDS � The people have to obey � OR ELSE! The government is AUTHORITARIAN � Limits the people’s freedom � Demands strict obedience

TWO Kinds of Centrally Planned Economies �Controlled Economy (Market Socialism) The government has to care about what the people think � There is a democracy = people control the government � The government has to consider the people’s wants, or the people get rid of the officials in the next election The government CONTROLS the economy through � Taxes � Social service programs � Owning the capital The people control the government through elections

Disadvantages of a Centrally Planned Economy COMMAND ECONOMY BIG TIME Disadvantages CONTROLLED ECONOMY LESSER but still Disadvantages �Disadvantages Lacks efficiency � Bureaucracy is a slow process to deal with economics � Workers have very little positive incentive to become better, faster Lacks economic freedom � The society comes FIRST � The individual comes SECOND

Disadvantages of a Centrally Planned Economy �Disadvantages Lacks economic growth � No reward for creativity and innovation � Managers must follow orders from far away government officials Lack of economic equity � History has shown that government big wigs get way more than lowly workers in command economies �Two bright spots! Can guarantee work Can jumpstart certain industries