What type of economic system involves the central government directing all major economic decisions?

The correct answer highlights a system where the central government exerts complete control over all major economic decisions. In communism, the government owns all means of production and distribution, aiming for a classless society where goods and services are shared among individuals rather than determined by market forces.

This type of system contrasts significantly with capitalism, where economic decisions are primarily driven by individuals and private enterprises. In capitalism, the market largely dictates prices, production, and distribution based on supply and demand.

Socialism, while also involving government control of certain sectors, allows for some degree of private ownership and market mechanisms. It seeks to balance individual freedoms with social equity. A mixed economy combines elements of both capitalism and socialism, incorporating both private enterprise and governmental oversight but does not involve the complete government control characteristic of communism.

Overall, the defining feature of communism is the centralized economic planning by the government, ensuring that every significant economic activity aligns with the overarching goal of communal ownership and equality.