What is a key characteristic of a planned economy?

A key characteristic of a planned economy is centralized control of resources. In such an economic system, the government or a central authority makes all significant decisions regarding the production and distribution of goods and services. This includes planning what to produce, how to produce it, and for whom it will be produced. The entirety of the economy is orchestrated to serve specific goals set by the state, which can include social welfare, economic equality, or strategic national interests.

This centralization allows for the coordination of the economy as a whole, with the aim of achieving particular objectives that may not be effectively managed by individual market forces. In contrast to a planned economy, other systems, such as free-market economies, rely on decentralized production decisions made by private firms and competition among those firms.