CENTRALLY PLANNED CENTRALLY PLANNED ECONOMIESECONOMIES

Economics Nov 7 2011

Centrally Planned Centrally Planned EconomiesEconomies

Name:Date: Nov-7-11Define 3 Key Terms (page 34)1)2)3)

Warm up Warm up

What do you think of when you hear the word communism? What does communism mean to you?

OR What do you think of when you hear the word

socialism? What does socialism mean to you?

Centrally Planned Centrally Planned EconomiesEconomies

How are centrally planned economies organized?

How did the centrally planned economy of the former Soviet Union function?

What problems exist within centrally planned economies?

Socialism is a social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society.

It is a formal economic system in which society exerts considerable control over the nation's wealth and property in the pursuit of social justice.

SocialismSocialism

Communism Communism

Communism is a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the government.

It is a formal economic system in which property, particularly capital property (e.g. factories, machines, tools, etc.), is commonly owned and scarce resources are allocated through planning as opposed to price signals in a free market.

In a centrally planned economy, the government

owns both land and capital. The government

decides what to produce, how much to produce,

and how much to charge.

Organization of Centrally Organization of Centrally Planned EconomiesPlanned Economies

Capitalism SocialismCommunism

System Type

informal formal formal

Ownership

mostlyprivate

Either /Both

public

Organization

decentralized

mixed centralized

Social objectives

freedom equality equality

Economic objectives

efficiency "fairness" "fairness"

The Former Soviet UnionThe Former Soviet Union

Soviet Agriculture In the Soviet Union, the government created large state-owned farms and collectives for most

of the country’s agricultural production. Soviet Industry

Soviet planners favored heavy-industry production (such as steel and machinery), over the production of consumer goods.

Soviet Consumers Consumer goods in the Soviet Union were scarce and usually of poor quality.

Problems of a Centrally Problems of a Centrally Planned EconomyPlanned Economy

Centrally planned economies face problems of poor-quality goods, shortages, and

diminishing production.

Section 3 AssessmentSection 3 Assessment

1. In a socialist country,

(a) central planning is unnecessary.

(b) the government often owns major industries, such as utilities.

(c) an authoritarian government controls the economy.

(d) economic equality is not important.

2. Which of the following is an advantage of a centrally planned economy?

(a) the system’s bureaucracies are small and flexible

(b) the system can work quickly to accomplish specific goals

(c) innovation is well rewarded

(d) consumers’ needs are well met

Section 3 AssessmentSection 3 Assessment

1. In a socialist country,

(a) central planning is unnecessary.

(b) the government often owns major industries, such as utilities.

(c) an authoritarian government controls the economy.

(d) economic equality is not important.

2. Which of the following is an advantage of a centrally planned economy?

(a) the system’s bureaucracies are small and flexible

(b) the system can work quickly to accomplish specific goals

(c) innovation is well rewarded

(d) consumers’ needs are well met

Section 3 AssessmentSection 3 Assessment

Key Terms and Main Ideas (page 38) 1) 2) Case Study (page 39) Read and answer the 2 questions at the

bottom of page 39