Google
Monday 
November 11, 2024 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
THREE-SECTOR AGGREGATE EXPENDITURES LINE: A graphical depiction of the relation between aggregate expenditures by the three domestic macroeconomic sectors (household, business, and government) and the level of aggregate income or production. The three-sector aggregate expenditures line combines consumption expenditures, investment expenditures, and government purchases. The slope of this aggregate expenditures line is based on the marginal propensity to consume, adjusted for marginal propensities of the other expenditures that are assumed to be induced when constructing the line. This is one of three aggregate expenditures lines based on the number of sectors included. The others are the two-sector aggregate expenditures line and the four-sector aggregate expenditures line.

Visit the GLOSS*arama


CENTRAL PLANNING:

A system of extensive central government control of an economy, including organizing production and making allocation decisions. This was the popular method of allocating resources and answering the three basic questions of allocation under communism and socialism economic systems of the Soviet Union, China, and others during the 1950s, 1960s, and 1970s.
Applying the communist/socialist philosophy that private property and market allocation was "bad", central planning relied on extremely detailed plans made by government. These plans would set specific production quotas for individual products, parts, components, and inputs fabricated by all of the factories and farms across the economy. This was a daunting, complex task that required detailed production information for hundreds of thousands of different commodities.

Inefficiency

While some attribute the fall of the Soviet Union in the 1980s to the United States military build-up, the burdensome bureaucratic inefficiency of central planning played an important role, if not THE key role in this decline.

Central planning tends to be inefficient due to:

  • 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.

Central Planning and Capitalism

While central planning is usually associated with communist/socialist economies it is also practiced, to a much lesser degree, by market-oriented economies such as that found in the United States. For example, the Federal Reserve System has a "central plan" for the growth of the money supply. The Department of Transportation has a "central plan" for highway construction. Almost every city has a "central plan" that specifies where different types of activities can locate within the city.

There are two main differences between "central plans" found in capitalism and communist/socialist-type central planning.

  • First, the plans found in capitalism are usually only for a segment of the economy. They do not attempt to integrate the massive amounts of information needed for an economy-wide central plan.

  • Second, planning undertaken in capitalism works within the confines of a market-based economy, making use of market efficiencies, rather than attempting to provide an alternative to the system.

<= CENTRAL BANKCERTIFICATES OF DEPOSIT =>


Recommended Citation:

CENTRAL PLANNING, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: November 11, 2024].


Check Out These Related Terms...

     | socialism | capitalism | market-oriented economy | government functions | paternalism | nationalization | planned economy | command economy | pure command economy |


Or For A Little Background...

     | economic system | communism | public sector |


And For Further Study...

     | private property | seventh rule of complexity | mixed economy | distribution standards | economic goals | three questions of allocation | pure market economy |


Search Again?

Back to the WEB*pedia


APLS

PINK FADFLY
[What's This?]

Today, you are likely to spend a great deal of time at a dollar discount store trying to buy either a T-shirt commemorating yesterday or a pair of handcrafted oven mitts. Be on the lookout for infected paper cuts.
Your Complete Scope

This isn't me! What am I?

There were no banks in colonial America before the U.S. Revolutionary War. Anyone seeking a loan did so from another individual.
"The art of leadership is saying no, not yes. It is very easy to say yes. "

-- Tony Blair, British prime minister

AACCLA
Association of American Chambers of Commerce in Latin America
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2024 AmosWEB*LLC
Send comments or questions to: WebMaster