Georgia Assessments for the Certification of Educators GACE Practice Test

A command economy is characterized by:

1. A laissez-faire approach by the government

2. A moderate amount of government intervention in the economy

3. Businesses commanding all aspects of the economy

4. The government controlling prices and production

The correct answer is: A laissez-faire approach by the government

A command economy is characterized primarily by the government controlling prices and production. In this type of economic system, the government makes all the decisions regarding the allocation of resources, including what goods and services are produced, how much is produced, and at what price they are sold. This central control is intended to achieve specific economic and social outcomes, often aiming to promote equality and minimize market fluctuations. In contrast, a laissez-faire approach, which is suggested as an alternative, refers to minimal government intervention in economic activities, allowing the forces of supply and demand to determine prices and production levels. Therefore, it does not align with the fundamental principles of a command economy, where the government directs economic activity. Similarly, a moderate amount of government intervention would indicate features of a mixed economy rather than a command economy, where the market still plays a significant role alongside government activities. Additionally, the idea that businesses command all aspects of the economy corresponds more to a capitalist system, where private enterprises hold significant control rather than the government. Thus, recognizing the government’s role in dictating prices and production is vital to understanding the nature of a command economy.