In a centrally planned economy, which of the following may the central authority do?
(A) Induce individuals to produce adequate amounts of a good that is very important for the well-being of the economy
(B) Intervene to achieve an equitable distribution when some people get so little that their survival is at stake
(C) Try to achieve the allocation of resources that is thought to be desirable for society as a whole
(D) Leave all decisions on what and how much to produce to price signals
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A), (B) and (C) only
In a centrally planned economy, the government or central authority plans all the important activities. It may step in to get the output and the sharing of goods it thinks right.
(A) Induce individuals to produce adequate amounts of a good that is very important for the well-being of the economy — Correct. Where individuals produce too little of such a good, the authority may induce them to produce more.
(B) Intervene to achieve an equitable distribution when some people get so little that their survival is at stake — Correct. It may step in for a fair share for the poorest.
(C) Try to achieve the allocation of resources that is thought to be desirable for society as a whole — Correct. This is the main aim of central planning.
(D) Leave all decisions on what and how much to produce to price signals — Incorrect. Price signals settle these problems in a market system. In central planning, the government makes the important decisions.
NCERT (2026-27): “1.3.1 The Centrally Planned Economy … The central authority may try to achieve a particular allocation of resources and a consequent distribution of the final combination of goods and services which is thought to be desirable for society as a whole. For example, if it is found that a good or service which is very important for the prosperity and well-being of the economy as a whole, e.g. education or health service, is not produced in adequate amount by the individuals on their own, the government might try to induce the individuals to produce adequate amount of such a good or service or, alternatively, the government may itself decide to produce the good or service in question. In a different context, if some people in the economy get so little a share of the final mix of goods and services produced in the economy that their survival is at stake, then the central authority may intervene and try to achieve an equitable distribution of the final mix of goods and services.” “1.3.2 The Market Economy … Thus, in a market system, the central problems regarding how much and what to produce are solved through the coordination of economic activities brought about by the price signals.” |