Economics Command Economy Questions Medium
In a command economy, international trade is regulated by the government through central planning and control. The government determines the types and quantities of goods and services that can be imported or exported, as well as the countries with which trade can be conducted.
The government sets specific targets and quotas for international trade, dictating the volume and value of imports and exports. These targets are usually based on the country's economic and political objectives, such as promoting domestic industries, achieving self-sufficiency, or maintaining a favorable balance of trade.
To regulate international trade, the government typically establishes state-owned trading companies or agencies that have a monopoly on import and export activities. These entities are responsible for negotiating trade agreements, determining prices, and coordinating the movement of goods across borders.
In a command economy, the government also controls the foreign exchange market, setting the exchange rates and managing currency transactions. This allows the government to influence the cost of imports and exports, as well as maintain stability in the balance of payments.
Additionally, the government may impose various trade barriers such as tariffs, quotas, and licensing requirements to restrict or promote specific types of trade. These measures are used to protect domestic industries, control the flow of goods, and regulate the allocation of resources.
Overall, in a command economy, international trade is heavily regulated and controlled by the government to align with its economic and political objectives.