Development often stagnates in planned economies because:Question 5Select one:a.Entrepreneurial individuals have few economic incentives for innovation.b.Private ownership of means of production leads to exploitation of workers.c.Prices of goods and services are fixed by market forces of supply and demand.d.Lack of barriers to trade results in increased competition for domestic producers.
Question
Development often stagnates in planned economies because:Question 5Select one:a.Entrepreneurial individuals have few economic incentives for innovation.b.Private ownership of means of production leads to exploitation of workers.c.Prices of goods and services are fixed by market forces of supply and demand.d.Lack of barriers to trade results in increased competition for domestic producers.
Solution
The development often stagnates in planned economies because of the following reason:
a. Entrepreneurial individuals have few economic incentives for innovation.
In a planned economy, the government controls all major aspects of economic activity. The state determines what goods are produced, how they are produced, and how they are distributed. This leaves little room for individuals to pursue their own entrepreneurial ventures. Without the potential for personal gain, there is less motivation for individuals to take risks and innovate. This lack of innovation can lead to stagnation in the economy.
The other options are not typically characteristics of a planned economy. In a planned economy, the means of production are usually owned by the state (not private individuals or businesses), prices are not determined by market forces of supply and demand, and there are often significant barriers to trade.
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