Before the fall of communism, the economies of the Soviet Union and Eastern Europe were centrally planned.
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Question:
Before the fall of communism, the economies of the Soviet Union and Eastern Europe were centrally planned. One aspect of central planning is that most prices are set by the government. A government-set prices may be too low, in that people want to buy more of the good at the fixed price than there are supplies available, or the price may be too high, so that large stocks of the good sit unsold on store shelves. What problem does government control of prices create for economists attempting to measure a country's GDP? Suggest a strategy for dealing with this problem.
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