The coordination problem in the centrally planned economies refers to the idea that
A) planners had to direct required inputs to each enterprise.
B) the price level and the level of employment were inversely related.
C) the immediate effect of more investment was less consumption.
D) exports had to be equal to imports for a central plan to work.

Question

Quizplus · Accepted Answer

In a centrally planned economy, all economic decisions are made by the government or central planning authority. The coordination problem arises because the planners need to direct required inputs, such as labor, capital, and materials to each enterprise. Due to the sheer size and complexity of the economy, it is difficult for the planners to efficiently allocate resources to meet the needs of every enterprise. As a result, there may be mismatches between the supply and demand of inputs, leading to inefficiencies and production bottlenecks.

The Coordination Problem in the Centrally Planned Economies Refers to the Idea