Central Planning Defines Resource Allocation

Steps:

• Define a planned economy as one where the government controls production and distribution.
• Identify that scarce resources are allocated based on central directives, not market forces.
• Contrast with market economies, where supply and demand prevail.
• Confirm that government decisions set priorities for resource use.

Why B is correct:

• In a planned economy, the central government's decisions directly determine resource allocation, as per the definition of command economies like those in Soviet-style systems.

Why the others are wrong:

• A describes a mixed economy, not pure central planning.
• C applies to market economies, where prices guide allocation.
• D relates to fiscal policy in any economy but does not directly allocate resources.

Final answer: B