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ADJUSTMENT, SHORT-RUN AGGREGATE MARKET: Disequilibrium in the short-run aggregate market induces changes in the price level that restore equilibrium. If the price level is above the short-run equilibrium price level, economy-wide product market surpluses cause the price level to fall. If the price level is below the short-run equilibrium price level, economy-wide product market shortages cause the price level to rise. In both cases short-run equilibrium is restored. You might want to compare adjustment, long-run aggregate market. Price level changes induce changes in both aggregate expenditures and real production. Unlike the long-run aggregate market, changes in the price level can induce changes in short-run aggregate supply, making it greater or less than full-employment real production.
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                           PLANNED ECONOMY: An economy, or economic system, that relies heavily on central planning by government to allocate resources and answer the three basic questions of allocation. A planned economy is often a type of command economy, in which government uses its coercive powers to implement central planning allocation decisions. A planned economy is one in which government commands (directs, orders, or dictates) the vast majority of resource allocation decisions according to a central plan. The contrasting economic system is a market-oriented economy, in which resource allocation decisions are achieved primarily through voluntary market exchanges.The goal of a planned economy is to avoid or correct the failings and imperfections of capitalism and a market-oriented economy. The primary imperfections are: - Market failure inefficiencies, especially market control.
- Business cycle instability that creates unemployment problems.
- Concentration of wealth and income and resulting inequality problems.
In theory, a planned economy can avoid these problems with a well-conceived, well-executed plan governing the allocation of resources, goods, and services. Communist and socialist countries, especially China and the former Soviet Union, provide the primary examples of centrally planned economies. The level of detail needed in planned economies is extensive. Every input, every output, every intermediate good, every worker, every resource is allocated based on a predetermined plan. Such planning is inherently less flexible and less efficient than markets. In practice, a planned economy tends to be inefficient because: - One, the resources used for the central planning process cannot be used to undertake actual production. In other words, a person (the planner) who spends eight hours calculating how much flour is needed to produce bread, is not actually producing any bread.
- Two, the central planning process, being developed and implemented by mere humans, is inherently flawed. Mistakes happen. Inputs are sent to the wrong factories. A decimal point is misplaced. Too much of one good is produced and too little of another. All of these mistakes mean less output is produced with available resources.
While communism and socialism are the primary examples of planned economies, market-oriented economies such as that found in the United States, are also planned economies to some degree. Federal government agencies and leaders (President, Congress, Federal Reserve System, etc.) develop and implement broad plans for the economy. Most state and local governments also have plans for their own particular segments of the economy. These market-oriented plans, however, are not nearly as detailed as those found in command economies and they tend to rely heavily on markets.
Recommended Citation:PLANNED ECONOMY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: March 22, 2023].
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BLUE PLACIDOLA
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Today, you are likely to spend a great deal of time at a dollar discount store looking to buy either several magazines on fashion design or a package of 3 by 5 index cards, the ones without lines. Be on the lookout for jovial bank tellers.
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The first paper notes printed in the United States were in denominations of 1 cent, 5 cents, 25 cents, and 50 cents.
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"Most of the things worth doing in the world had been declared impossible before they were done." -- Louis D. Brandeis, Supreme Court Justice
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NE
Nash Equilibrium
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