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Explain The Role Of Money In A Socialist Economy?

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Muhammad Abdullah786 Profile
In a socialistic economy, money serves as a standard of value, a medium of exchange, a store of value and standard of deferred payments. The role of money in a planned economy is not that of a master but of a servant. The state keeps a rigid control over the supply of money and thus minimizes its evil effects. Money in a socialistic economy is never allowed to guide production through the free play of market forces.

The scare resources are distributed according to plan drawn up well in advance by the planning authority. The desire of what, where and for whom is to produce are all controlled by the state.Similarly, in a socialistic economy the central authority itself ciders the consumption pattern keeping in view the likings and disliking of the people. There is no price mechanism operation for the direction of consumption pattern.

In a centrally controlled economy, all the factors of production are also fully controlled by the state. The rewards of each factors of production are paid not by matching demand and supply but by the quantity and quality of work done.We can say that as money in a socialistic economy is effectively under the control of the state so there are no evil effects of changing price level, income and employment in the country.

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