Which economic system is characterized by the government making all economic decisions?

• A. Market economy
• B. Command economy
• C. Mixed economy
• D. Traditional economy

Answer: (B)

In a command economy, central planning and government control drive decisions about what to produce, how to produce, and who gets the output. The government owns or directs the means of production and sets production targets and prices, allocating resources according to a national plan rather than through market signals. This is the defining feature of that system.

This differs from a market economy, where decisions come from individuals and businesses acting on prices in the market; a mixed economy, which combines private decisions with some government intervention; and a traditional economy, which relies on customs and routines to guide production and distribution.