Which of the following best describes a Planned Economy?

• A. an economic system in which decisions are made by individuals or the open market
• B. an economic system combining private and public enterprise
• C. an economic system directed by government agencies
• D. a political system based on citizenship representation

Answer: (C)

A planned economy is one where the government directs economic activity through central plans. Central planners decide what to produce, how much to produce, how to allocate resources, and at what prices, rather than letting consumers and businesses respond to market signals. That’s why describing the economy as being directed by government agencies best fits a planned economy. The other ideas point to market-driven decisions by individuals, a mix of private and public enterprises, or a political system, none of which capture the government-led planning aspect.