What is the incentive problem in central planning?
Please provide the best answer for the statement.
In a centrally planned economy the incentives are ineffective for encouraging economic initiative and work, or for directing the most efficient use of productive resources. In a market economy, profits and losses signal what firms should produce, how they should produce, and how productive resources should be allocated to best meet the wants of a nation. Central planning also lacked entrepreneurship and stifled innovation, both of which are important forces for achieving long-term economic growth. Individual workers lacked much motivation to work hard because pay was limited and there were few consumer goods to buy or they were of low quality.
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Suppose that the expected inflation rate is 3 percent and the actual inflation rate is 6 percent. Then borrowers
A. are worse off and lenders are better off. B. and lenders are both worse off. C. are better off and lenders are worse off. D. and lenders are both better off.
Social Security provides incentive for individuals to
(a) save more than they consume during their working years. (b) manage their assets privately in order to prepare to live on principal and interest during retirement. (c) rely on transfer payments made by the working class to them during retirement. (d) carefully manage their private retirement portfolios and use the income earned to consume and save during retirement.
Unemployment can be caused by downswings in the business cycle, people changing jobs, different skills needed by employers, or seasonal fluctuations in demand
a. True b. False Indicate whether the statement is true or false
If the real interest rate is 5 percent and the inflation rate is 2 percent, then the nominal interest rate is 7 percent
a. True b. False Indicate whether the statement is true or false