In which economic system are production and investment decisions made centrally by the government?

In a command economy, the government plays a central role in making decisions related to production and investment. This system is characterized by the absence of market forces, where the government dictates what goods and services are produced, how they are produced, and who receives them. The goal of a command economy is often to achieve specific outcomes set by the state, such as equitable distribution of resources or rapid industrialization.

Unlike market economies, where supply and demand guide decisions, and mixed economies, which combine elements of both market and central planning, a command economy relies heavily on central planning to manage and control economic activity. Traditional economies, on the other hand, rely on customs and traditions to determine economic activities, making them distinctly different from command economies. Thus, the correct identification of a command economy highlights the extent of government control over economic choices.