Answer to Question #242306 in Macroeconomics for varoujan02

Question

Identify the strengths and weaknesses of a planned economy. Explain what we mean by planning failure.

Answer 1

The strengths of planned economy include the following;

1) In planned economy every person can afford and manage to consume goods and services for prices are kept under control.

2) In planned economy there is no high inequality of wealth

3)Duplication is impossible because allocation of resources is centrally planned

4) In planned economy there is low level of unemployment as the government targets to provide employment to every person.

The weaknesses of planned economy include the following;

1)Firms are likely to be inefficient because they lack of profit motive.

2) In planned economy there is a lot of time and money wastage. Especially when government is communicating instructions to firms.

3) There's no wide variety of goods and services for consumers to select. Government instead decides which goods to be produced

Planning failure

is a pre-planned response for how one can handle or deal with negative events in your life. For example negative event in economy like inflation.