Explain why a centrally-planned economy might not grow as rapidly as a market economy. 50 words...

Explain why a centrally-planned economy might not grow as rapidly as a market economy. 50 words minimum

Expert Solution

In a centrally planned economy, decisions regarding productions are talked by the central agencies of the government. Therefore, in such an economy firms face a high level of regulations and control. When firms do not have the autonomy, they fail to make optimal decisions and cannot use their resources efficiently. So, resources are under-utilized and output remains low. Also, government bureaucracy leads to red-tapism, excessive control, corruption and misuse of resources. Also, in such an economy people have less economic freedom, so they fail to achieve their highest economic potential.

Rahul Sunny answered 2 years ago

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