Economics: NBSE class 9 social science chapter 16 answers/notes

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Here are the notes, questions, solutions, textual answers, pdf, extras, for Chapter 16: Economics, which is a part of the Social Science Class 9 syllabus for students studying under the Nagaland Board of School Education. However, these notes should be used only for references and additions/modifications should be made as per the requirements.

Introduction

In this chapter, you will understand the concept of “economy” in a detailed manner. An economy can be defined as the sum total of all the economic activities of a country. All the activities that are related to the production, distribution and consumption of wealth are called economic activities.

Different countries have different forms of economies, and thus the economy does not have a singular form in every country in the world. In some countries, the main source of income for the people is agriculture, and therefore they are called agricultural economies. Some economies in the world are very systematic and developed, like the economy of the United States of America, and therefore they are called developed economies. On the other hand, economies like the Indian economy have not reached the level of the American economy, and therefore our economy is identified as a developing economy.

Again, economies are classified on the basis of ownership of the means of production. In some countries, private companies own the means of production. Search economies are called capitalist economies. In China, it is the government that owns most of the means of production. China’s economy is called a “socialist economy.” In India, we have both private companies and government agencies that own the means of production. India’s economy is known as a “mixed economy.” In the chapter, you will learn in brief about the economy and how the economy can be classified depending on different factors.

Textual questions and answers

Choose the correct answer

1. Which of the following is a characteristic of a mixed economy?

A. All resources are owned and controlled by the government. B. Economic decisions are solely driven by supply and demand. C. Both private individuals and the government play a role in economic activities. D. Economic decisions are determined by tradition and cultural practices.

Answer: C. Both private individuals and the government play a role in economic activities.

2. In a mixed economy, what is the role of the government in economic activities?

A. It has no role in the economy. B. It plays a limited role, regulating key industries and providing some services. C. It controls all aspects of the economy. D. It only enforces contracts but doesn’t regulate industries.

Answer: B. It plays a limited role, regulating key industries and providing some services.

3. Which group of countries is more likely to have a higher Human Development Index (HDI)?

A. Underdeveloped countries B. Developed countries C. Emerging economies D. Least developed countries

Answer: B. Developed countries

4. There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below.

Assertion (A): There is a co-existence of private and public sectors in the mixed economy.
Reason (R): Since 1991 Indian economy is set on the path of liberalisation and globalisation.

A. Both (A) and (R) are true and (R) is the correct explanation of (A)
B. Both (A) and (R) are true but (R) is not the correct explanation of (A)
C. (A) is correct but (R) is wrong
D. (A) is wrong but (R) is correct

Answer: B. Both (A) and (R) are true but (R) is not the correct explanation of (A)

5. Consider the statements given below and choose the correct answer.

Statement I: One of the main features of an underdeveloped economy is low per capita income.
Statement II: Most of the people are employed in the industrial sector in an underdeveloped economy.

A. I is correct and II is incorrect
B. I is incorrect and II is correct
C. Both I & II are incorrect
D. Both I & II are correct

Answer: A. I is correct and II is incorrect

6. Identify the type of economy as per the characteristics given below.

I. Property is privately owned and economic decisions are privately made
II. Entrepreneurs are guided by self-interest and profit motive
III. It is also known as free economy or laissez-faire economy

A. Mixed economy B. Socialist economy C. Capitalist economy D. Planned economy

Answer: C. Capitalist economy

Very short answer type questions

1. What is an economic activity?

Ans: Activities relating to the production and consumption of wealth are called economic activities.

2. Define production.

Ans: The creation or addition of economic value in goods is called production.

3. What is meant by investments?

Ans: The part of production which is not consumed but used for further production of goods and services is termed as an investment.

4. Name the four factors of production used in the production of a commodity or service.

Ans: Land, capital (money), labour and raw materials are the four factors of production used in the production of a commodity or service.

5. Define a closed economy.

Ans: Closed economy is an economy that has no economic relations with the rest of the world.

6. What is meant by a planned economy?

Ans: Planned economy refers to an economy where the government (i.e., Central Planning Authority) has full control of all economic activities of the country.

7. What is a mixed economy?

Ans: A mixed economy is a form of economy in which both the public sector as well as the private sector coexist.

Short answer type questions

1. What are two important functions that an economy performs?

Ans: The two important functions that an economy performs are:

I. To produce goods and services to satisfy human wants.
II. To provide employment or income-earning opportunities to its people.

2. State the principal features of a capitalist economy.

Ans: The principal features of a capitalist economy are:

I. Freedom of Enterprise and Contract: Capitalists have the freedom to set up business enterprises and sell goods and services to maximise profits.
II. Freedom of consumption: A capitalist economy allows freedom to consumers in the sense that consumers are free to decide which goods they would consume and in what quantities.
III. Free Market: A capitalist economy is an economy where the market mechanism is allowed to work freely.
IV. Competition: In a capitalist economy, there is free and perfect competition.
V. Laissez-Faire State: Under the capitalist economy, the state does not interfere in the economic affairs of society.

3. State the features of a mixed economy.

Ans: The features of a mixed economy are:

I. Coexistence of private and public sectors.
II. Economic planning.
III. Beneficial for the masses. In a mixed economy, prices are generally regulated or administered at certain prices.
IV. Greater welfare.
V. Protects the interests of workers.
VI. Reduction of inequality of incomes.

4. State three characteristics of underdeveloped countries.

Ans: The characteristics of an underdeveloped economy are:

I. Low per capita income: One of the main features of an underdeveloped economy is a low per capita income.
II. The high growth rate of the population: The rate of population growth in underdeveloped countries is quite high compared to developed countries.
III. Agriculture: Generally, agriculture is the main occupation of people in underdeveloped countries.
IV. Unequal distribution of income: In underdeveloped countries, there is widespread inequality in the distribution of income.
V. Technological backwardness: In underdeveloped countries, techniques of production are required.

5. State three characteristics of developed economies.

Ans: Three characteristics of developed economies are:

I. High per capita income: National income and per capita income are high in developed countries.
II. The predominance of industrial and service sectors: The developed economy is dominated by large industries and service sectors.
III. Technological advancement: Production techniques used in these countries are highly complex and advanced.

6. Distinguish between the private and public sectors.

Ans: The private sector and public sector can be differentiated on the following lines:

Private sector	Public sector
I. Nearly 80% of the country’s national income is generated by the private sectors in India.	I. The Percentage share of public sector in the country’s national income is 24%.
II. The economic activities are privately owned and controlled.	II. These are owned and controlled by the government.
III. It is guided by profit motive.	III. The main purpose is to remove regional imbalance and develop backward areas.
IV. The private sector is more productive and efficient compared to the public sector.	IV. Public sector is less productive and efficient than the private sector.

Long answer type questions

1. Describe briefly the main features of the Indian economy.

Ans: The main features of the Indian economy are:

An underdeveloped economy: India is considered an underdeveloped economy. Most of the features of an underdeveloped economy are more or less present in the Indian economy.
Dualistic economy: Presently, the structure of our economy is dualistic in nature. In our traditional sector labour-intensive techniques of production are used and in the modern sector of capital intensive techniques are employed.
Mixed economy: Indian economy is a mixed economy. There is the coexistence of the public and private sectors. The private sector is not completely free in its operation. The government controls and regulates this sector through its various industrial, monetary, and fiscal policies.
A developing economy: Achievements of increasing national income, capital formation, agricultural development and industrial policies are sufficient enough to call our economy a developing economy.
A planned economy: Under the able leadership of Prime Minister Jawaharlal Nehru, India had chosen the path of economic planning. The planning commission of India was established under this initiative to assess the country’s available resources and to formulate a plan for their most efficient use.

2. ‘Indian economy is a developing economy.’ Explain the statement.

Ans: The following major achievements of the Indian plans are sufficient enough to call our economy a developing economy:

Increase in national income: India is one of the fastest developing countries in the world. Development in all sectors has resulted in an increase in its national income.
Increase in rate of capital formation: Indian economy is growing very fast. The development in the secondary and tertiary sectors has increased the per capita income.
Agricultural progress: Indian economy is an agrarian economy. 66% of the Indian population is engaged in agricultural activities. The green revolution in agriculture has made India self-sufficient in food grain production.
Industrial progress: There are a large number of industries, both in the private as well as public sector undertakings. India has a large number of large-scale industries, small-scale industries, and cottage industries.

3. Describe in brief the role of private sector in the Indian economy.

Ans: The private sector plays a dominant role in the Indian economy in the following ways:

i. It provides employment to more than 90% of the country’s working population.
ii. Nearly 80% of the country’s national income is generated by the private sector.
iii. IIT accounts for 95.5% of gross domestic savings.
iv. Agriculture, the largest occupation in the private sector in India, contributes 29% to the economy and provides employment to 66% of the total working population.
v. Almost all the training activities are managed by the private sector.
vi. The private sector has made the country self-sufficient, particularly in consumer goods. The entire small-scale and cottage industry is owned by the private sector.

4. Distinguish between a capitalist economy and a socialist economy.

Ans:

Capitalistic economy	Socialist economy
i. Means of production are owned and managed by private people.	i. Means of production are owned and managed by the government.
ii. Economic activities are guided by self-interest and profit motive.	ii. Economic activities are guided by the motive of social welfare.
iii. All economic problems are solved with the help of price mechanism.	iii. All economic decisions are taken by the government through economic planning.
iv. There is the existence of large inequalities of income.	iv. Inequalities of income are relatively very small.
v. Economic fluctuations are widely seen.	v. Economic fluctuations have no place here.
vi. Society is divided into two groups (a) haves and (b) have nots.	vi. There is low degree of class conflict.

5. Has the system of the planned economy in India been successful in producing high economic growth? Why?/Why not?

Ans: Yes, the system of the planned economy in India has been successful in producing high economic growth and thereby increasing national and per capita incomes. In India, all economic decisions are taken by the central planning authority. The Planning Commission was established under the able leadership of our first Prime Minister, Pandit Jawaharlal Nehru, in March 1950 to assess the available resources in the country and formulate a plan for their most effective use. The commission fixes the period of a plan at five years. The first five-year plan was launched on April 1, 1951, and since then we have undertaken and completed 11 plans. This has resulted in a considerable rise in GDP (Gross Domestic Product), savings, and investment. India also achieved self-sufficiency in food grain production after the introduction of the five-year plans.

Extra MCQs

1: What is the term for the use of goods and services for the satisfaction of human wants?

A. Production
B. Investment
C. Consumption
D. Distribution

Answer: C. Consumption

2: In which type of economy are the means of production owned and managed by the whole community or the state?

A. Capitalistic Economy
B. Socialistic Economy
C. Mixed Economy
D. Agrarian Economy

Answer: B. Socialistic Economy

3: An economy that has no economic relations with the rest of the world is known as what?

A. An open economy
B. A complex economy
C. A global economy
D. A closed economy

Answer: D. A closed economy

4: What is the investment limit for a business to be classified as a Tiny Industry?

A. Up to ₹1 crore
B. Up to ₹25 lakh
C. Exceeding ₹1 crore
D. Up to ₹50 lakh

Answer: B. Up to ₹25 lakh

5: Which of the following is a primary feature of a developed economy?

A. High growth rate of population
B. Low per capita income
C. Predominance of the agricultural sector
D. High standard of living

Answer: D. High standard of living

6: The economic system where decisions are determined by the free play of market forces like demand and supply is called:

A. Planned Economy
B. Free or Unplanned Economy
C. Controlled Economy
D. Socialist Economy

Answer: B. Free or Unplanned Economy

7: What is the full form of NITI Aayog?

A. National Institute for Technology and Innovation
B. National Institution for Transforming India
C. National Investment and Trade Initiative
D. National Institution for Taxing India

Answer: B. National Institution for Transforming India

8: In a joint sector enterprise in India without foreign participation, what is the designated share of capital for the public?

A. 26%
B. 25%
C. 49%
D. 51%

Answer: C. 49%

9: Which of the following is NOT a feature of a Capitalist Economy?

A. Private Property and Inheritance
B. Freedom of Enterprise
C. Economic equality
D. Profit Motive

Answer: C. Economic equality

10: The system where goods and services are exchanged for other goods and services without the use of money is known as:

A. Monetary System
B. Credit System
C. Barter System
D. Investment System

Answer: C. Barter System

11: Which of the following countries is given as an example of an industrial economy?

A. India
B. Brazil
C. Pakistan
D. Japan

Answer: D. Japan

12: The sum total of all economic activities of a country is defined as:

A. National Income
B. An Economy
C. Gross Domestic Product
D. Investment

Answer: B. An Economy

13: In a mixed economy, which of the following is true?

A. Only the public sector exists.
B. Only the private sector exists.
C. Both public and private sectors co-exist.
D. There is no government interference.

Answer: C. Both public and private sectors co-exist.

14: What is the main occupation of people in an agricultural economy?

A. Industry and trade
B. Services and technology
C. Agriculture and allied activities
D. Banking and insurance

Answer: C. Agriculture and allied activities

15: The term ‘investment’ implies that part of production which is:

A. consumed immediately for satisfaction of wants.
B. distributed freely to the public.
C. used to produce further goods and services.
D. exported to other countries.

Answer: C. used to produce further goods and services.

16: Which institution was established in March 1950 to formulate plans for the effective use of India’s resources?

A. The Reserve Bank of India
B. The Finance Ministry
C. The Planning Commission
D. NITI Aayog

Answer: C. The Planning Commission

17: An economy characterized by the co-existence of a traditional sector and a modern sector is known as:

A. A Mixed Economy
B. A Dualistic Economy
C. A Developing Economy
D. A Planned Economy

Answer: B. A Dualistic Economy

18: What is a common feature of underdeveloped countries?

A. Low growth rate of population
B. Full exploitation of resources
C. Widespread unemployment
D. High level of productivity

Answer: C. Widespread unemployment

19: (I) In a simple economy, the barter system of exchange prevails.
(II) Money is not used as a medium of exchange in such an economy.

A. I is the cause for II.
B. II is the result of I.
C. I and II are contradictory statements.
D. I and II are independent statements.

Answer: B. II is the result of I.

20: Statement 1: A capitalist economy is also known as a laissez-faire economy.
Statement 2: In a capitalist economy, the state does not interfere in the economic affairs of society.

A. Statement 1 is true, but Statement 2 is false.
B. Statement 2 is the correct explanation for Statement 1.
C. Both statements are true but unrelated.
D. Both statements are false.

Answer: B. Statement 2 is the correct explanation for Statement 1.

21: (I) A closed economy’s economic activities remain unaffected by what happens abroad.
(II) A closed economy neither exports nor imports goods and services.

A. I is a contradiction of II.
B. II is the cause for I.
C. I is an example of II.
D. I and II are independent of each other.

Answer: B. II is the cause for I.

22: Statement 1: Underdeveloped economies are also known as developing economies.
Statement 2: These economies are passing through the process of growth and development.

A. Both statements are false.
B. Statement 1 is true, but Statement 2 is false.
C. Both statements are true, and Statement 2 is the reason for Statement 1.
D. Both statements are true but are not related.

Answer: C. Both statements are true, and Statement 2 is the reason for Statement 1.

23: (I) In a socialist economy, the main aim is to attain maximum social advantage.
(II) In a socialist economy, there is an equal distribution of national income and wealth among the people.

A. I is the cause for II.
B. II is an example of I.
C. I is a contradiction of II.
D. I and II are independent statements.

Answer: B. II is an example of I.

24: Statement 1: The Indian economy is considered a mixed economy.
Statement 2: There is a co-existence of public and private sectors in India.

A. Statement 1 is false, but Statement 2 is true.
B. Both statements are true, and Statement 2 is the correct explanation for Statement 1.
C. Both statements are true but are not related to each other.
D. Both statements are false.

Answer: B. Both statements are true, and Statement 2 is the correct explanation for Statement 1.

25: (I) In a capitalist economy, there is a possibility of class conflict.
(II) There exists a huge gap between the ‘haves’ and ‘have-nots’ in a capitalist system.

A. I is independent of II.
B. I is a contradiction of II.
C. II is the cause for I.
D. I is an example of II.

Answer: C. II is the cause for I.

26: Arrange the following Five-Year Plans of India in the correct chronological order:

(i) Fourth Five-Year Plan
(ii) Second Five-Year Plan
(iii) First Five-Year Plan
(iv) Third Five-Year Plan

A. (iii) → (ii) → (iv) → (i)
B. (i) → (ii) → (iii) → (iv)
C. (iii) → (iv) → (ii) → (i)
D. (ii) → (iii) → (i) → (iv)

Answer: A. (iii) → (ii) → (iv) → (i)

27: Consider the following events in the history of the Indian economy. Choose the correct chronological order.

(i) The First Five-Year Plan was launched.
(ii) The Planning Commission of India was established.
(iii) The Prime Minister announced the decision to dissolve the Planning Commission.
(iv) The British rule in India ended.

A. (iv) → (ii) → (i) → (iii)
B. (ii) → (iv) → (i) → (iii)
C. (iv) → (i) → (ii) → (iii)
D. (i) → (ii) → (iv) → (iii)

Answer: A. (iv) → (ii) → (i) → (iii)

28: Arrange the following Indian Five-Year Plans in sequential order of their implementation:

(i) Tenth Five-Year Plan
(ii) Eighth Five-Year Plan
(iii) Twelfth Five-Year Plan
(iv) Ninth Five-Year Plan

A. (ii) → (iv) → (i) → (iii)
B. (i) → (ii) → (iv) → (iii)
C. (ii) → (i) → (iv) → (iii)
D. (iv) → (ii) → (i) → (iii)

Answer: A. (ii) → (iv) → (i) → (iii)

29: Select the option that lists the historical emergence of economic systems in the correct order.

(i) Emergence of Socialism to remove exploitation.
(ii) Emergence of Complex Economies post-Industrial Revolution.
(iii) Existence of Simple Economies with barter systems.

A. (ii) → (i) → (iii)
B. (iii) → (ii) → (i)
C. (i) → (iii) → (ii)
D. (iii) → (i) → (ii)

Answer: B. (iii) → (ii) → (i)

Extra questions and answers

1. How can an economy be defined?

Answer: An economy can be defined as the sum total of all economic activities of a country. Every activity which has an economic motive is termed an economic activity and thus constitutes part of the economy.

2. What does the term ‘consumption’ mean in economics?

Answer: Consumption can be defined as the use of goods and services for the satisfaction of human wants.

3. How does investment increase an economy’s capacity?

Answer: The term ‘investment’ implies that part of production which is not consumed but used to produce further goods and services. It increases the capacity of an economy to produce more goods and services in the future.

4. On what three bases can world economies be classified?

Answer: The three bases on which economies of the world can be classified are:

(i) On the basis of nature.
(ii) On the basis of ownership over the means of production.
(iii) On the basis of level of development.

5. What system of exchange prevails in a simple economy?

Answer: The barter system of exchange prevails in a simple economy.

6. Why is a simple economy called a self-reliant economy?

Answer: It is called a self-reliant economy because produced goods are meant for self-consumption.

7. When did complex economies come into existence?

Answer: Complex (or modern) economies came into existence in the post-Industrial Revolution period.

8. Name any two examples of industrial economies.

Answer: The USA and UK are two examples of industrial economies.

9. Name any two examples of developed economies.

Answer: America and Canada are two examples of developed economies.

10. Name any two examples of developing economies.

Answer: India and Pakistan are two examples of developing economies.

11. How does the Planning Commission of India define an underdeveloped economy?

Answer: According to the Planning Commission of India (now NITI Aayog), “An underdeveloped economy is characterised by the co-existence in greater or less degree of unutilised or under utilised manpower on the one hand and of unexploited natural resources on the other.”

12. When was the Planning Commission of India established?

Answer: The Planning Commission of India was established in March 1950.

13. What is the full form of NITI AAYOG?

Answer: The full form of NITI is National Institution for Transforming India.

14. What is the private sector?

Answer: The private sector refers to all those occupations and economic activities which are privately owned and controlled.

15. What are small scale industries?

Answer: Small scale industries comprise all such industries wherein fixed capital investment does not exceed ₹1 crore.

16. What are tiny industries?

Answer: Tiny industries are a category of units/industries wherein fixed capital investment is made up to ₹25 lakh.

17. What are large scale industries?

Answer: Large scale industries are a category of industries where fixed capital investment exceeds ₹1 crore.

18. What does the public sector imply?

Answer: The public sector implies all those occupations and economic activities owned and controlled by the government.

19. What are statutory undertakings?

Answer: Statutory undertakings are established in accordance with a special act passed by the Parliament.

20. What is the joint sector?

Answer: When both the government and individuals enter into an agreement to run an enterprise on a partnership basis, they are referred to as joint enterprises.

21. What are economic activities?

Answer: All activities which are related to the production, distribution and consumption of wealth are called economic activities.

22. What is the barter system?

Answer: The barter system is a system under which goods and services are exchanged for other goods and services.

23. What is money in economics?

Answer: Money is anything which is generally accepted by the people as a medium of exchange and acts as a measure of value.

24. Define the term utility.

Answer: Utility is the want-satisfying power of a commodity.

25. What are factors of production?

Answer: All those goods and services which are used for the production of other goods and services are called factors of production.

26. What is a production unit?

Answer: A production unit is any individual, firm or government undertaking that produces or creates value in goods.

27. What is the price mechanism?

Answer: The price mechanism is a sort of motivating force that helps in taking all economic decisions regarding what to produce, how to produce and for whom to produce on the basis of price.

28. What is economic planning?

Answer: Economic planning is the making of major economic decisions by a central planning authority on the basis of a survey of a country’s available resources.

29. How is per capita income calculated?

Answer: Per capita income is calculated by dividing the National Income by the Total Population.

30. What does national income imply?

Answer: National income implies the money value of all final goods and services produced in an economy during an accounting year.

31. What are the main functions of an economy?

Answer: The main functions of an economy are:

(i) To produce goods and services to satisfy human wants.
(ii) To provide employment or income earning opportunities to its people.

32. Differentiate between production and consumption.

Answer: Production means the creation or addition of value in goods and services.

Consumption is defined as the use of goods and services for the satisfaction of human wants.

33. Explain the features of a simple economy.

Answer: A simple economy is one wherein people produce simple kinds of goods in limited quantity to satisfy their wants. People of such economies have limited wants. The barter system of exchange prevails in such an economy, where goods and services are exchanged for other goods and services, and money is not used as a medium of exchange. People in a simple economy lead an isolated life and are self-sufficient, so it is also known as a self-sufficient economy. The production process is very simple, and the produced goods are meant for self-consumption, which is why it is also called a self-reliant economy.

34. Explain the features of a complex economy.

Answer: A complex economy refers to an economy in which a large variety of goods, and in large quantities, are produced. The process of production is highly complex and advanced. Money is widely used as a medium of exchange, and goods are produced with a view to sell them in the markets to earn income. Infrastructural facilities such as transport, communication, banking, and insurance services are available for internal and international trade.

35. What kind of economic relations does an open economy have?

Answer: An open economy has the following types of economic relations with other countries, or the rest of the world:

(i) Export and import of goods and services.
(ii) Buying of foreign shares, bonds, debentures, etc. and vice-versa.
(iii) Lending to foreigners and borrowing from foreigners.
(iv) Sending gifts to foreigners and receiving the same from foreigners.
(v) Nationals of a country going to other countries to work or vice-versa.

36. Distinguish between a planned and an unplanned economy.

Answer: A planned economy, also known as a controlled economy, refers to an economy where the government or a Central Planning Authority has full control over all economic activities. All decisions regarding production, distribution, and prices are taken by the government.

An unplanned or free economy is one in which economic activities and problems relating to production, distribution, and prices are determined by the free play of market forces, such as demand and supply. There is no government interference in economic activities, and people are free to choose occupations of their choice.

37. Distinguish between an agricultural and an industrial economy.

Answer: An agricultural economy is one wherein the main occupation of people is agriculture and allied activities like livestock, milk production, and wool. People in these economies are mostly illiterate and backward, using old methods of production. Infrastructural facilities such as transport, communication, and banking are in a state of underdevelopment.

An industrial economy is dominated by people whose main occupation is industry and trade. People here are modern and advanced, using complex and advanced techniques of production. Production is carried on a large scale, and the infrastructural facilities are all well-developed.

38. What is meant by ‘Freedom of Enterprise and Contract’ in capitalism?

Answer: In a capitalist economy, ‘Freedom of Enterprise and Contract’ means that capitalists have the freedom to set up business enterprises and to sell the goods and services produced by these enterprises in the market at prices and in quantities that allow them to maximise profits. The market mechanism is allowed a free play, and an entrepreneur is free to enter or leave the market at will.

39. What is meant by ‘Laissez-Faire State’ in a capitalist economy?

Answer: ‘Laissez-Faire State’ means that under the capitalist economy, the state does not interfere in the economic affairs of the society.

40. Explain the role of profit motive and class conflict in capitalism.

Answer: In capitalism, the role of a private enterprise is the profit of the company. They are the least bothered about benefits to the staff.

Class conflict arises because there is a huge gap between the haves and have-nots, that is, between the poor and the rich. This creates the possibility of class conflict.

41. What is meant by social property in a socialistic economy?

Answer: Social property in a socialist economy means that all properties belong to the society, and private property is totally abolished.

42. How does a socialistic economy aim to achieve economic equality?

Answer: In a socialist economy, the main aim is to achieve economic equality by attaining maximum social advantage and ensuring the equal distribution of national income and wealth among the people.

43. How do the public and private sectors co-exist in a mixed economy?

Answer: In a mixed economy, the economy is divided into two parts: the public sector and the private sector. The basic and key industries are controlled by the government, while the development of the rest of the industries is left to the private sector, but still under the control of the government. In a mixed economy, the free market mechanism and economic planning co-exist. The government controls private production through licenses and permits, and sometimes the government itself enters into production. This co-existence of public and private enterprises is a major characteristic of a mixed economy.

44. What are the salient features of a mixed economy?

Answer: The salient features of a mixed economy are:

(i) Coexistence of private and public sectors.
(ii) Economic planning.
(iii) Beneficial for the masses. In a mixed economy, prices are generally regulated or are administered prices.
(iv) Greater welfare.
(v) Protects the interest of workers.
(vi) Reduction of inequality of incomes.

45. What are the main features of a developed economy?

Answer: The main features of developed economies are:

(i) High per capita income: National income and per capita income are high in developed countries.
(ii) High level of national income: The size of national income of the developed countries is very large.
(iii) Predominance of industrial and service sectors: Developed economies are dominated by large industrial and service sectors.
(iv) Full exploitation of resources: Developed countries make full exploitation of their available natural, physical, and human resources. All able and willing persons are provided employment in these countries.
(v) Technological advancement: Production techniques used in these countries are highly complex and advanced.
(vi) High standard of living: The living standard of people in developed countries is very high.

46. What are the main characteristics of underdeveloped economies?

Answer: The main characteristics of underdeveloped economies are:

(i) Low per capita income: One of the main features of an underdeveloped economy is a low per capita income.
(ii) High growth rate of population: The rate of population growth in underdeveloped countries is quite high as compared to the developed countries.
(iii) Agriculture: Generally, agriculture is the main occupation of the people in underdeveloped countries.
(iv) Unequal distribution of income: In underdeveloped countries, there exists a widespread inequality in the distribution of income.
(v) The Problem of Unemployment: The existence of widespread unemployment is a common feature of underdeveloped countries.
(vi) Low level of productivity: In underdeveloped countries, the productivity of labour is very low, which in turn results in a low level of national income.
(vii) Technological backwardness: In underdeveloped countries, techniques of production are backward.

47. Why is the Indian economy considered an underdeveloped economy?

Answer: India is considered an underdeveloped economy as most of the features of an underdeveloped economy are more or less present in the Indian economy. The chief indicators are:

(i) About one-third of India’s population lives below the poverty line.
(ii) The level of per capita income is very low as compared to developed economies of the world.
(iii) There is an unequal distribution of national income.
(iv) The per head amount of capital and rates of capital formation are low.
(v) There exists widespread unemployment and under-employment in the country.
(vi) A huge amount of mineral, forest, and other natural resources still remain unutilised and unexplored.
(vii) There is a lack of infrastructural facilities, such as transport, communication, and banking, which are highly required for the country’s agricultural and industrial growth.

48. What do you mean by a dualistic economic structure?

Answer: By dualistic economic structure, we mean the existence of a traditional economy along with a modern economy. In our traditional sector, labour-intensive techniques of production are used, and in the modern sector, capital-intensive techniques are employed.

49. Why is the Indian economy called a mixed economy?

Answer: The Indian economy is a mixed economy because there is a co-existence of public and private sectors. The Industrial policies of 1948 and 1956, formulated by the Government of India, made provisions for their co-existence. Some strategic, basic, and heavy industries are run under the public sector. There is also a huge private sector under which a large number of industries are managed. However, the private sector is not completely free in its operation; the government controls and regulates this sector through its various industrial, monetary, and fiscal policies.

50. What was the purpose of establishing the Planning Commission of India?

Answer: The Planning Commission of India was established to assess the country’s available resources and to formulate a plan for their most effective use.

51. How is the Indian economy classified on the basis of ownership?

Answer: On the basis of ownership, the Indian economy can be divided into the private sector, public sector, and joint sector.

52. What are the main constituents of the private sector in India?

Answer: The main constituents of the private sector in India are:

(i) Sole Proprietorship or one’s own business: which includes Indian agriculture, cottage industries, retail trade, and activities of self-employed persons like doctors and lawyers.
(ii) Partnership: where according to the Companies Act, the maximum number of partners cannot exceed 10 in banking and 20 in other types of business.
(iii) Joint Stock Companies: which are of two types: Private Limited Companies with 2 to 50 shareholders, and Public Limited Companies like Reliance Industries and TISCO.

53. What are the different types of public sector undertakings?

Answer: Public sector undertakings are of two types:

(i) Departmental enterprises: which are owned, managed, and controlled by government departments, such as Railways and Post and Telegraphs.
(ii) Non-departmental enterprises: which include statutory undertakings established by a special act of Parliament, like the Food Corporation of India, and company-type enterprises formed like joint stock companies but under government control, such as HMT and BHEL.

54. What are the causes of the poor performance of public sector undertakings?

Answer: The main reasons for the poor performance of public sector undertakings are:

(i) A large number of public sector enterprises have operated at less than 50% of their installed capacity.
(ii) Another problem relates to the planning and construction of projects, where the actual cost far exceeded the original estimates, and projects took much longer to complete than expected.
(iii) Public sector enterprises are often plagued with undue political interference in their day-to-day working.
(iv) There is a lack of incentive for ordinary workers and officials.
(v) Public enterprises generally do not aim at profit-maximisation, as they are established to achieve the twin objectives of social welfare and economic development.
(vi) The workers and employees in the public sector are indisciplined and corrupt.
(vii) Over-staffing is a common feature in public sector undertakings.

55. What are the main features of a joint sector enterprise?

Answer: The main features of a joint sector enterprise are:

(i) Mixed Ownership: The government, private entrepreneurs, and the investing public jointly own a joint sector enterprise.
(ii) Combined Management: The management and control of the enterprise lie with the nominees or representatives of the government, private business, and the public.
(iii) Share Capital: The share of the government, private businessmen, and the public in the capital is 26%, 25%, and 49% respectively. The aim is to pool the financial resources and technical know-how of the state and private individuals.

56. How is share capital divided in a joint sector undertaking?

Answer: According to the guidelines laid down by the Government of India, the share capital of a joint sector undertaking without foreign participation is divided as follows: government gets 26%, a private businessman gets 25%, and the public gets 49%.

57. Differentiate between a simple economy and a complex economy with examples.

Answer: A simple economy is one wherein people produce simple kinds of goods in limited quantity to satisfy their wants. People of such economies have limited wants. The barter system of exchange prevails in such an economy, where goods and services are exchanged for other goods and services, and money is not used as a medium of exchange. For example, a farmer gives wheat to a blacksmith and to a carpenter and gets their services in return. People in a simple economy lead an isolated life and are self-sufficient. It is also known as a self-sufficient economy because produced goods are meant for self-consumption. Such types of economy existed in Indian villages in old times.

A complex economy refers to an economy in which a large variety of goods, and those too in large quantities, are produced. The process of production in such economies is highly complex and advanced. Money is widely used as a medium of exchange. Goods are produced with a view to sell them in the markets to earn income. Infrastructural facilities such as transport, communication, banking, and insurance services are available for internal and international trade. Complex economies came into existence in the post-Industrial Revolution period.

58. Distinguish between a closed economy and an open economy. Why are closed economies rare today?

Answer: A closed economy is one that has no economic relations with the rest of the world. It neither exports nor imports goods and services from other countries. Consequently, its economic activities remain unaffected by what happens abroad. It is a self-reliant or independent economy. A closed economy is like a room whose all doors and windows are shut; no one can come in and none can go out from it. USSR had this type of economy for many years after the Revolution of 1917.

An open economy is one which has the following types of economic relations with other countries:

(i) Export and import of goods and services.
(ii) Buying of foreign shares, bonds, debentures, etc. and vice-versa.
(iii) Lending to foreigners and borrowing from foreigners.
(iv) Sending gifts to foreigners and receiving the same from foreigners.
(v) Nationals of a country going to other countries to work or vice-versa.

Nowadays, closed economies are not found in any part of the world.

59. Explain any four main features of a capitalist economy.

Answer: Four main features of a capitalist economy are:

(i) Private Property and Inheritance: All citizens are allowed to hold private property and inherit it from their forefathers.
(ii) Freedom of Enterprise and Contract: Capitalists have the freedom to set up business enterprises and to sell the goods and services that are produced by these enterprises in the market at the prices and in quantities, which allow them to maximise profits. Thus, in any capitalist economy the market mechanism is allowed a free play. An entrepreneur is free to enter or leave the market at will.
(iii) Freedom of Consumption: A market consists of producers as well as consumers. A capitalist economy also allows freedom to consumers in the sense that consumers are free to decide which goods they would consume and in what quantities.
(iv) Free Market: A capitalist economy is an economy where the market mechanism is allowed to work freely. A market mechanism is the system under which the prices and quantities of all goods and services are determined through interactions between the producers and the consumers.

60. Explain any four main features of a socialistic economy.

Answer: Four main features of a socialistic economy are:

(i) Social property: In socialist economy, all properties belong to the society. Private property is totally abolished.
(ii) Government is the only producer: In socialist economy, production of various commodities is under the control of Government.
(iii) Social control over factors of production: In a socialist economy all factors of production are under the control of government.
(iv) Economic equality: In socialist economy the main aim is to attain maximum social advantage and equal distribution of national income and wealth among the people.

61. How does a mixed economy harness the features of both capitalism and socialism?

Answer: A mixed economy is a mixed form of capitalism and socialism. In this economy, the best elements of capitalism as well as socialism are present and the bad features of both are given up. It appreciates the advantages of private enterprise and private property with their emphasis on self-interest and profit motive. At the same time, the government itself runs some industries. The economy is divided into two parts—the public sector and the private sector. A mixed economy is where the free market mechanism and economic planning co-exist. The co-existence of public and private enterprises is a major characteristic of a mixed economy.

62. Compare a capitalistic and a socialistic economy based on ownership, motive, and instrument.

Answer: A comparison between a capitalistic and a socialistic economy based on ownership, motive, and instrument is as follows:

63. Compare a developed economy and a developing economy.

Answer: Developed economies are those which enjoy a high level of per capita income and a high standard of living. Through industrialisation, they have exploited most of their natural, physical, and human resources and have offered large-scale gainful employment. Developed economies are dominated by large industrial and service sectors. They make full exploitation of their available resources, use highly complex and advanced production techniques, and the living standard of the people is very high.

Underdeveloped or developing economies are those where the level of per capita income is low and the standard of living of the people is low. In these economies, agriculture is the main occupation of the people, and they use traditional methods of production. Most of the natural and human resources remain unexploited or under-utilised for want of capital and technical knowhow.

64. Explain the role of the private sector in the Indian economy.

Answer: The significance of the private sector in India is as follows:

(i) Nearly 80 per cent of the country’s national income is generated by the private sector in India.
(ii) It provides employment to more than 90 per cent of country’s working population.
(iii) It accounts for 95.5 per cent of the gross domestic savings.
(iv) Agriculture, the largest occupation in the private sector in India, alone contributes 29 per cent and provides employment to 66 per cent of the total working population.
(v) Almost the entire trading activities are managed by the private sector.
(vi) Private sector has made the country self-sufficient particularly in consumer goods. The entire small scale and cottage industry is owned by the private sector.
(vii) Private sector is more productive and efficient than the public sector.

65. Explain the role of the public sector in the Indian economy.

Answer: The significance of the public sector in India is as follows:

(i) The percentage share of public sector in country’s national income is 24 per cent.
(ii) Most of the infrastructural facilities, e.g., transport, banking, communication, irrigation etc., have been developed in the public sector.
(iii) With the setting up of some basic and heavy industries our public sector has provided the strong, industrial base and thus has opened the path of rapid industrialisation of the country.
(iv) In order to remove regional imbalances, it has developed industries in backward areas.

66. Differentiate between departmental and non-departmental public enterprises.

Answer: Departmental enterprises are those enterprises which are owned, managed and controlled by the government departments, such as Railways, Post and Telegraphs, Defence manufacturing, etc. They get their finances from the government budget.

Non-departmental enterprises refer to those government companies which are registered under an Act and have 51 per cent or more shares with the government. These are company-type public enterprises. They are autonomous in their working, and the government does not interfere in their day-to-day working. They consist of both financial and non-financial enterprises.

67. What is the sectoral classification of the Indian economy on the basis of occupation?

Answer: On the basis of occupation, the Indian economy is classified into the Primary Sector, Secondary Sector, and Tertiary Sector.

68. Describe the features of a capitalistic economy. What are its main characteristics?

Answer: The features and main characteristics of a Capitalist Economy are:

(i) Private Property and Inheritance: All citizens are allowed to hold private property and inherit it from their forefathers.
(ii) Freedom of Enterprise and Contract: Capitalists have the freedom to set up business enterprises and to sell the goods and services that are produced by these enterprises in the market at the prices and in quantities, which allow them to maximise profits. Thus, in any capitalist economy the market mechanism is allowed a free play. An entrepreneur is free to enter or leave the market at will.
(iii) Freedom of Consumption: A market consists of producers as well as consumers. A capitalist economy also allows freedom to consumers in the sense that consumers are free to decide which goods they would consume and in what quantities.
(iv) Free Market: A capitalist economy is an economy where the market mechanism is allowed to work freely. A market mechanism is the system under which the prices and quantities of all goods and services are determined through interactions between the producers and the consumers.
(v) Competition: In a capitalist economy there is free and perfect competition.
(vi) Laissez-Faire State: Under the capitalist economy state does not interfere in the economic affairs of the society.
(vii) Profit Motive: The role of a private enterprise is profit of the company. They are the least bothered about benefits to the staff.
(viii) Class Conflict: There is a huge gap between haves and have nots; between the poor and the rich. Hence, there is a possibility of class conflict.
(ix) Price Mechanism: The price of a commodity is dependent upon market fluctuations of supply, demand and other factors.

69. Describe the features of a socialistic economy. How does it differ from capitalism?

Answer: The main features of a socialistic economy are:

(i) Social property: In socialist economy, all properties belong to the society. Private property is totally abolished.
(ii) Government is the only producer: In socialist economy, production of various commodities is under the control of Government.
(iii) Social control over factors of production: In a socialist economy all factors of production are under the control of government.
(iv) Economic equality: In socialist economy the main aim is to attain maximum social advantage and equal distribution of national income and wealth among the people.
(v) Economic planning: A socialistic economy is basically a planned economy.
(vi) Government control on economy: Government controls all the economic activities.

A socialistic economy differs from capitalism in several ways. In a capitalistic economy, the means of production are owned and managed by private people, whereas in a socialistic economy, they are owned and managed by the government. The motive in capitalism is self-interest and profit, while in socialism, it is social welfare. Economic problems in capitalism are solved by the price-mechanism, but in socialism, all economic decisions are taken by the government through economic planning. Capitalism allows complete economic freedom and freedom of enterprise, but in a socialistic economy, people are not allowed to start their own business as the government is the only producer. Finally, society in a capitalistic economy is divided into ‘haves’ and ‘have-nots’, creating class conflict, whereas in a socialistic economy, there is no class distinction.

70. What is a mixed economy? Discuss its salient features with India as an example.

Answer: A mixed economy is a mixed form of capitalism and socialism. It is an economy in which both government and private individuals exercise economic control. In this economy, the best elements of capitalism as well as socialism are present and the bad features of both are given up. It is an economy where the free market mechanism and economic planning co-exist. The economy is divided into two parts—public sector and private sector.

The salient features of a mixed economy are:
(i) Coexistence of private and public sectors.
(ii) Economic planning.
(iii) Beneficial for the masses. In a mixed economy, prices are generally regulated or are administered prices.
(iv) Greater welfare.
(v) Protects the interest of workers.
(vi) Reduction of inequality of incomes.

India is a good example of a mixed economy. The Indian economy has a co-existence of the public and private sectors. Industrial policies of 1948 and 1956 formulated by the Government of India made the provision for their co-existence. Some strategic, basic and heavy industries are being run under the public sector, while a huge private sector manages a large number of industries. However, the private sector is not completely free; the government controls and regulates this sector through its industrial, monetary and fiscal policies. The market mechanism occupies a prime position but is not allowed to work freely, as it is subject to government control and regulation. India has also adopted economic planning, and since 1991, the Indian economy is set on the path of liberalisation and globalisation.

71. Distinguish between Capitalistic, Socialistic, and Mixed Economies.

Answer: The distinction between Capitalistic, Socialistic, and Mixed Economies on five bases is as follows:

72. What are the characteristics of a developed economy? Explain them in detail.

Answer: Economies which enjoy a high level of per capita income and high standard of living are called developed economies. The main features or characteristics of developed economies are listed below:

(i) High per capita income: National income and per capita income are high in developed countries.
(ii) High level of national income: The size of national income of the developed countries is very large.
(iii) Predominance of industrial and service sectors: Developed economies are dominated by large industrial and service sectors.
(iv) Full exploitation of resources: Developed countries make full exploitation of their available natural (e.g., land, minerals, etc.), physical (machines, raw material, etc) and human resources (e.g., manpower). All able and willing persons are provided employment in these countries.
(v) Technological advancement: Production techniques used in these countries are highly complex and advanced.
(vi) High standard of living: The living standard of people in developed countries is very high.

73. What are the characteristics of an underdeveloped economy? Explain with reference to India.

Answer: Underdeveloped or developing economies are those economies where the level of per capita income is low and the standard of living of the people is low. The characteristics of underdeveloped economies are:

(i) Low per capita income: One of the main features of an underdeveloped economy is a low per capita income.
(ii) High growth rate of population: The rate of population growth in underdeveloped countries is quite high as compared to the developed countries.
(iii) Agriculture: Generally agriculture is the main occupation of the people in underdeveloped countries.
(iv) Unequal distribution of income: In underdeveloped countries there exists a widespread inequality in the distribution of income.
(v) The Problem of Unemployment: The existence of widespread unemployment is a common feature of underdeveloped countries.
(vi) Low level of productivity: In underdeveloped countries the productivity of labour is very low which in turn results in low level of national income.
(vii) Technological backwardness: In underdeveloped countries techniques of production are backward.

India is considered an underdeveloped economy as most of these features are present in the Indian economy. The chief indicators are:

(i) About one-third of India’s population lives below the poverty line.
(ii) The level of per capita income is very low as compared to developed economies of the world.
(iii) There is an unequal distribution of national income.
(iv) The per head amount of capital and rates of capital formation are low.
(v) There exists widespread unemployment and under-employment in the country.
(vi) A huge amount of mineral and forest and other natural resources still remain unutilised and unexplored.
(vii) There is a lack of infrastructural facilities, e.g., transport, communication, banking, etc., which are highly required for the country’s agricultural and industrial growth.