MONEY AND CREDIT---ECONOMICS---CLASSX

 REVISION QUESTIONS AND ANSWERS

Question 1.
The currency notes on behalf of the Central Government are issued by whom? (2011 D)
Answer:
Reserve Bank of India.

Question 2.
Why do banks ask for collateral while giving credit to a borrower? (2014 D, 2011 OD)
Answer:
Collateral is an asset that the borrower owns (land, building, vehicle, livestock, land documents, deposits with banks, etc.) which stands as a security against the money borrowed. In case the borrower fails to repay the loan, the lender has the right to sell the asset or collateral.

Question 3.
What do banks do with the deposits they accept from customers? (2012 D)
Answer:
Banks use a major portion of deposits to extend loans to people.

Question 4.
What comprises ‘terms of credit’? (2012 OD)
Answer:
Interest rate, collateral and documentation requirement and mode of repayment together comprise terms of credit.

Question 5.
What is the main informal source of credit for rural households in India? (2013 D)
Answer:
Money lenders are the main source of informal credit for rural households.

Question 6.
Which body supervises the functioning of formal sources of loans? (2013 OD)
Answer:
Reserve Bank of India.

Question 7.
‘Modern currency is without any use of its own’; then why is it accepted as a medium of exchange? (2014 OD)
Answer:
Modern currency is accepted as a medium of exchange because it is certified for a particular denomination (?10, ?100, etc.) of the country by authorities set up by the Central Government. It is issued by the Reserve Bank of India and it can be used for buying any commodity which is on sale. It is authorized by the government of the country.

Question 8.
What is the meaning of ‘barter system’? (2015 D)
Answer:
Barter system refers to the system of exchange of goods and services. It is the system by which one commodity is exchanged for another without the use of money. Before money was introduced, people practised barter system.
Example: A farmer could buy a dhoti from a weaver or a pair of shoes from a cobbler in exchange of grains he produced.

Question 9.
What is the meaning of ‘investment’? (2015 D)
Answer:
Investment is buying of an asset in the form of a factory, a machine, land and building, etc. (physical assets) or shares (monetary assets) for the purpose of making or sharing profits of the enterprises concerned.
Common investments are—buying land, factories, machines for faster production, buying small local companies to expand production, cheap labour, skilled engineers, IT personnel, etc.

Question 10.
What is meant by double coincidence of wants? (2015 OD)
Answer:
Double coincidence of wants means when both parties have agreed to sell and buy each other’s commodities.

Question 11.
How does money act as a medium of exchange? (2015 OD)
Answer:
Money acts as a medium of exchange as it acts as an intermediate in the exchange process and transactions. A person holding money can easily exchange it for any commodity or services that he or she might want.

Question 12.
How do the deposits with banks become their source of income? (2016 D)
Answer:
Banks charge a higher interest rate on loans they extend than what they offer on deposits. The difference of interest is the main source of income of banks.

Question 13.
Why one cannot refuse a payment made in rupees in India? (2016 D)
Answer:
One cannot refuse a payment made in rupees in India because it is accepted as a medium of exchange. The currency is authorized by the government of the country.

Question 14.
Compare formal sector loans with informal sector of loans regarding interest only. (2016 D)
Answer:
Most of the informal lenders charge a much higher interest on loans than the formal sector loAnswer:

Question 15.
Why is the supervision of the functioning of formal sources of loans necessary? (2016 OD)
Answer:
Supervision of the functioning of formal sources of loans is necessary because banks have to submit information to the RBI on how much they are lending, to whom they are lending and at what interest rate etc.

Question 16.
Prove with an argument that there is a great need to expand formal sources of credit in rural India. (2016 OD)
Answer:
There is great need to expand formal sources of credit in rural India because:

1.    There is no organisation that supervises the credit activities of lenders in the informal sector. They lend at whatever interest rate they choose.

2.    No one can stop rural money-lenders from using unfair means to get their money back.

Question 17.
Why are most of the poor households deprived from the formal sector of loans? (2016 OD)
Answer:
Most of the poor households are deprived from the formal sector loans because of lack of proper documents and absence of collateral.

Question 18.
What do you understand by demand deposits?
Answer:
To ensure safety of their money, people deposit their money with banks. Banks accept deposits and pay interest on deposits. People have the provision to withdraw their money as and when they require. Since money can be withdrawn on demand, these deposits are known as demand deposits.

Features:

1.    A demand deposit has the essential characteristic of money. It can be used as a medium of exchange.

2.    The facility of cheques against demand deposits makes it possible to make payments, without using cash.

3.    Since demand deposits are accepted widely as a means of payment along with currency, they constitute money in the modem economy.

Question 19.
Which country has successfully organized SHGs? Who had initiated the programme?
Answer:
Bangladesh has successfully organized SHGs. Grameen Bank of Bangladesh is the biggest success story in reaching the poor to meet their credit needs at reasonable rates. Grameen Bank has now over 6 million borrowers in 40,000 villages across Bangladesh. Most of the borrowers are women and belong to the poorest section of society. This idea is the brain child of Prof. Mohammad Yunus, recipient of 2006 Nobel Prize for Peace.

Question 20.
Highlight the inherent problem in double coincidence of wants. (2017 D)
Answer:
Double coincidence of wants means that when someone wants to exchange his goods with another person, the latter must also be willing to exchange his goods with the first person. It can only work when both the persons are ready to exchange each other’s goods.

Question 21.
How does the use of money make it easier to exchange things? Give an example. (2017 OD)
Answer:
The use of money solves the problem of double coincidence of wants. Money acts as a medium of exchange and serves as a unit of value.

Short Answer Questions (SA) 3 Marks

Question 22.
What is money? Why is modern money currency accepted as a medium of exchange? (2012 D)
Answer:
Money is a medium of exchange in transactions. A person holding money can easily exchange it for any commodity or service that he or she might want.
Modem money currency is accepted as a medium of exchange because

·       it is certified for a particular denomination (For example, ₹ 10, ₹ 20, ₹ 100, ₹ 1,000).

·       it is issued by the Central Bank of the country.

·       it is authorized by the government of the country.

Question 23.
What are the modern forms of money? Why is the ‘rupee’ widely accepted as a medium of exchange? Explain two reasons. (2013 D)
Or
Why is modern currency accepted as a medium of exchange without any use of its own? Give reasons?
Answer:
Modem forms of money currency in India include paper notes and coins which are known as Rupees and Paise.

1.    It is accepted as a medium of exchange because the currency is authorized by the Government of India.

2.    In India, the Reserve bank of India issues currency notes on behalf of the Central Government of India.

3.    The law legalizes the use of rupee as a medium of payment that cannot be refused in settling transaction in India.

4.    No Individual in India can legally refuse a payment made in rupees.
Therefore, the rupee is widely accepted as a medium of exchange.

Question 24.
What is collateral? Why do lenders ask for collateral while lending? Explain. (2012)
Answer:
Collateral is an asset that the borrower owns (land, building, vehicle, livestock, land documents, deposits with banks etc.) which stands as a security against the money borrowed. In case the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to recover the loan money. Most lenders ask for collateral while lending as a security against their own funds.

Question 25.
“Cheap and affordable credit is essential for poor households both in rural and urban areas.” In the light of the above statement explain the social and economic values attached to it. (2013 OD)
Or
“Cheap and affordable credit is crucial for the country’s development.” Assess the statement. (2016 D)
Or
‘Credit has its own unique role for development’. Justify the statement with arguments. (2016 OD)
Answer:
Credit means loAnswer: It refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future repayment.

1.    Cheap and affordable credit is crucial for the country’s growth and economic development. Credit is in great demand for various kinds of economic activities—big or small investments, to set up business, buying cars, houses, etc.

2.    In rural areas credit helps in the development of agriculture by providing funds to farmers to buy seeds, fertilizers, expensive pesticides.

3.    Manufacturers need credit for buying raw material or to meet ongoing expenditure of production. Credit helps in the purchase of plant, machinery, equipment, etc.

4.    Some people may need to borrow for illness, marriages etc.
Thus, cheap and affordable credit is crucial for the country’s growth and economic development.

Question 26.
How does money solve the problem of double coincidence of wants? Explain with an example. (2014 D)
Answer:
Money acts as a medium of exchange. Money can be exchanged for any kind of commodity or service of one’s choice or need. Before money was introduced, people practised barter system. They exchanged goods with each other.
Example, A farmer could buy a dhoti from a weaver or a pair of shoes from a cobbler in exchange of grains he produced.

The problem with the barter system was that both the parties had to agree to sell and buy each other’s product. This is known as double coincidence of wants.

In barter system, where goods are directly exchanged without the use of money, it is essential that there is a double coincidence. Double coincidence is a situation where two persons need or desire to have each other’s product.

Money solves this problem as with money we can buy whatever we want and whenever we want, without having to exchange something in return.

Question 27.
How is money used in everyday life? Explain with examples. (2014 D)
Answer:

1.    Money plays a central role in our daily life. It is used as a medium of exchange to carry out transactions.

2.    Money buys us food, clothing, shelter and other basic necessities of life.

3.    Money provides us social security. It is needed to procure services like transport, education, healthcare, entertainment, recreation, and so on. Money facilitates business and trade and is the basis of the working of an economy.

Question 28.
Explain with examples, how people are involved with the banks. (2014 D)
Answer:

1.    Banks help people to save their money and keep their money in safe custody of the bank. Banks accept deposits from the public and also help people to earn interest on their deposits.

2.    People can withdraw the money deposited with the bank at the time of their need. As the money can be withdrawn on demand, these are called demand deposits.

3.    Banks also grant loans to people for a variety of purposes. In times of need individuals, business houses and industries can borrow money from the banks.

Question 29.
Why is it necessary for the banks and cooperative societies to increase their lending facilities in rural areas? Explain. (2015 D)
Answer:
Banks and Cooperatives can help people in obtaining cheap and affordable loans. This will help people to grow crops, do business, set up small-scale industries or trade in goods and also help indirectly in the country’s development. They should do so, so that relatively poor people do not have to depend on informal sources of credit (money-lenders).

Question 30.
How can money be easily exchanged for goods or services? Give an example to explain. (2016 D)
Answer:
Money as a medium of exchange for goods and services:
A person holding money can easily exchange it for any commodity or service that he or she might want. Everyone prefers to receive payments in money and exchange the money for things they want.

For example: A shoemaker wants to sell shoes in the market and buy wheat. The shoe maker will first exchange shoes for money and then exchange the money for wheat. If the shoemaker had to directly exchange shoes for wheat without the use of money, he would have to look for a wheat growing farmer who not only wants to sell wheat but also wants to buy the shoes in exchange. Both the parties have to agree to sell and buy each other’s commodities. This process is very difficult, time consuming and unhealthy.

Question 31.
“The credit activities of the informal sector should be discouraged.” Support the statement with arguments. (2016 D)
Answer:
The credit activities of the informal sector should be discouraged because:

1.    85% of loans taken by the poor households in the urban areas are from informal sources. There is no organisation that supervises the credit activities of lenders in the informal sector.

2.    Informal lenders charge very high interest on their loAnswer: They try to charge more and more interest on their loans as there are no boundaries and restrictions.

3.    Higher cost of borrowing means a larger part of the earnings of the borrowers is used to repay the loan.

4.    In certain cases, the high interest rate for borrowing can mean that the amount to be repaid is greater than the income of borrower. This could lead to increasing debt and debt trap, therefore the credit activities of the informal sector should be discouraged.

Question 32.
Why do we need to expand formal sources of credit in India? (NCERT Question)
Answer:

1.    There is no organisation that supervises the credit activities of lenders in the informal sector. They lend at whatever interest rate they choose.

2.    No one can stop rural money-lenders from using unfair means to get their money back.

3.    Informal lenders charge a very high rate of interest on loans and as a result a larger part of the earnings of the borrowers and farmers are used to pay the loans.

4.    The amount to be repaid is often greater than income, and farmers and other borrowers in villages fall in a debt trap.
Thus, it is necessary that banks and co-operatives increase their lending, particularly in rural areas, so that dependence on informal sources of credit ends.

Long Answer Questions (LA) 5 Marks

Question 33.
What is the basic objective of ‘Self Help Groups’? How do they work? Describe any four advantages of ‘Self Help Groups’ for the poor. (2015 D, 2011 D)
Answer:
The basic objective of ‘Self Help Groups’ is to organize rural poor, particularly women belonging to one neighbourhood into small Self Help Groups (15-20 members). These members save regularly and the amount varies from ₹25-100 or more depending upon their ability to save.
The four advantages of ‘Self Help Groups’ are as follows:

1.    The members can take small loans from the group itself to meet their needs. The group charges interest on these loans which is still less than what moneylenders charge.

2.    After a year or two, if the group is regular in savings, it becomes eligible for availing loan from the bank which is sanctioned in the name of the group to create self employment opportunities. All important decisions regarding loan, purpose, amount of interest, non-payment of loan are taken by the group members.
For instance, small loans are provided to the members for releasing mortgaged land, meeting working capital needs, for acquiring assets like sewing machines, handlooms, cattle etc.

3.    Since non-repayment of loans is dealt with seriously by group members, therefore banks are willing to lend to the poor women when organized in SHGs, even though they have no collateral as such. Thus, the SHGs help women to become financially self reliant.

4.    The regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence etc.

Question 34.
‘Banks and cooperatives help people in obtaining cheap and affordable loans’ Which values according to you does this support? (2011 OD)
Answer:
Cheap and affordable loans help people to grow crops, do business, set up small scale industries or trade in goods.
This promotes:

1.    Self reliance and financial security and independence of people.

2.    Protection of the relatively poor against corrupt moneylenders.

3.    Eradication of poverty in general.

4.    All this indirectly helps in the country’s development.

Question 35.
What is Credit? Why is cheap and affordable credit important for the country’s development? Give four reasons. (2012 D)
Or
What is credit? Explain with an example, how credit plays a vital and positive role for development. (2014 OD)
Answer:
Credit means loans. It refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future repayment.

1.    Cheap and affordable credit is crucial for the country’s growth and economic development. Credit is in great demand for various kinds of economic activities—big or small investments, to set up business, buying cars, houses, etc.

2.    In rural areas credit helps in the development of agriculture by providing funds to farmers to buy seeds, fertilizers, expensive pesticides.

3.    Manufacturers need credit for buying raw material or to meet ongoing expenditure of production. Credit helps in the purchase of plant, machinery, equipment, etc.

4.    Some people may need to borrow for illness, marriages etc.
Thus, cheap and affordable credit is crucial for the country’s growth and economic development.

Question 36.
What are the two categories of sources of credit? Mention four features of each. (2013 OD)
Answer:
The two sources of credit are formal sources and informal sources:
Formal sources of credit:

1.    Banks and cooperative societies fall under the formal sector. One can obtain loans from banks or cooperative societies.

2.    The Reserve Bank of India supervises the functioning of formal sources of loAnswer:

3.    Bank loans require documentation and collateral (collateral is an asset such as land, building, vehicle, livestock, deposits with the bank, etc.). This is used as a guarantee to the lender until the loan is paid back.

4.    Formal sources cannot charge any rate of interest from the borrowers according to their whims.
Informal sources of credit:

·       In the informal sector money can be borrowed from a person, friend, relative, moneylender, traders, employers, etc.

·       There is no organization that checks or supervises the activities of lenders in the informal sector.

·       Loans from informal sources do not require any such collateral.

·       They charge a very high rate of interest on loans as they do not require any collateral.

Question 37.
Which government body supervises the functioning of formal sources of loans in India? Explain its functioning. (2012 OD)
Answer:
The Reserve Bank of India supervises the functioning of formal sources of loans.
Functions of Reserve Bank of India.

1.    RBI requires commercial banks to maintain a minimum cash balance out of the deposits they receive. The RBI monitors that the banks actually maintain the cash balance.

2.    RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small-scale industries, small borrowers, SHGs, etc.

3.    RBI issues guidelines for fixing rate of interest on deposits and lending by commercial banks.

4.    Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc.

Question 38.
What are the various sources of credit in rural areas? Which one of them is the most dominant source of credit and why? (2013 D)
Answer:
Moneylenders are the most dominant amongst sources of credit for rural households. They constitute an informal source of credit. They charge a very high rate of interest on loans as they do not require any collateral. They are the most convenient source of credit in the rural areas.
Other sources of rural credit:

1.    Cooperative Societies are another major source of rural credit. They are a source of formal sector credit. Members of a Cooperative pool their resources for helping one another, e.g., Farmers’ Cooperatives, Weavers’ Cooperatives, etc. They offer cheap credit in rural areas for their members. Once these loans are repaid, another round of loans is offered.

2.    Agricultural traders, relatives and friends are other informal sources of rural credit. Some farmers borrow from agricultural traders who supply the farm inputs (such as seeds, fertilizers, pesticides, etc.) on credit at the beginning of the cropping season and repay the loans after the harvest.

3.    Commercial banks also give loans to rural households. However, not many rural households borrow from banks as they require proper documentation and collateral.

Question 39.
“Deposits with the banks are beneficial to the depositors as well as to the nation”. Examine the statement. (2016 OD, 2015 D)
Answer:
Benefit of deposits to the depositors:

1.    Bank accepts the deposits and pays interest to the depositor.

2.    Banks help people save their money and keep their money in safe custody of the bank.

3.    People can withdraw the money as and when they require.

4.    Banks also grant loans to people for a variety of purposes. In times of need, individuals, business houses and industries can borrow money from the banks.

Benefit of deposits to the Nation:

1.    Banks use the major proportion of the deposit to extend loans.

2.    There is a huge demand for loans for various economic activities. In times of need, business houses and industries can borrow money from the banks.

3.    Banks mediate between those who have surplus funds and those who are in need of these funds. Thus, it helps in the economic development of the Nation.

Question 40.
How do banks play an important role in the economy of India? Explain. (2015 OD)
Answer:

1.    Banks help people to save their money and keep their money in safe custody. To ensure safety of their money, people deposit their money with banks. Banks accept deposits and pay interest on deposits. People have the provision to withdraw their money as and when they require.

2.    Banks also grant loans to people for a variety of purposes. In times of need individuals, business houses and industries can borrow money from the banks.

3.    Credit provided by banks is crucial for the country’s growth and economic development. Credit is needed for all kinds of economic activities, to set up business, buy cars, houses, etc.

4.    Banks also help people in obtaining cheap and affordable loans. This can help people to grow crops, do business, set up small-scale industries or trade in goods and also help indirectly in the country’s development. They should do so, so that relatively poor people do not have to depend on informal sources of credit (money-lenders).

Question 41.
Describe the vital and positive role of credit with examples. (2016 D)
Answer:
In the festive season, a shoe manufacturer, Ram receives an order from a large trader in town for 3,000 pairs of shoes to be delivered in a month’s time. To complete production on time Ram has to hire workers for stitching and pasting work. He has to purchase the raw materials. To meet these expenses Ram obtains loans from two sources.

First, he asks the leather supplier to supply leather now and promises to pay him later.

Second, he obtains loan in cash from the large traders as advance payment for 1000 pairs of shoes with a promise to deliver the whole order by the end of the month.

At the end of the month, Salim is able to deliver the order, make a good profit and repay the money he had borrowed.

Salim obtains credit to meet the working capital needs of production. The credit helps him to meet the ongoing expenses of production, complete production on time and thus increase his earnings. Credit therefore plays a vital and positive role in this situation.

Question 42.
How can the formal sector loans be made beneficial for poor farmers and workers? Suggest any five measures. (2016 OD)
Answer:
Formal sector loans can be made beneficial for poor farmers and workers in the following ways:

1.    Create greater awareness among farmers about formal sector loans.

2.    Process of providing loans should be made easier. It should be simple, fast and timely.

3.    More number of Nationalized Banks/cooperative banks should be opened in rural sectors. Banks and cooperatives should increase facility of providing loans so that dependence on informal sources of credit reduces.

4.    The benefits of loans should be extended to poor farmers and small scale industries.

5.    While formal sector loans need to expand, it is also necessary that everyone receives these loans. It is important that formal credit is distributed more equally so that the poor can benefit from cheaper loans.

 

SECTORS OF INDIAN ECONOMY---ECONOMICS---CLASS X

 REVISION QUESTIONS AND ANSWERS

Very Short Answer Questions (VSA) 1 Mark

Question 1.
Classify the economy on the basis of ownership of enterprises. (2012)
Answer:
Public Sector and Private Sector.

Question 2.
Classify the economy on the basis of the nature of the activity. (2015)
Answer:
The economy is classified on the basis of economic activities into three sectors namely Primary sector, Secondary sector and Tertiary sector.

Question 3.
What is disguised unemployment? (2012)
Answer:
Disguised unemployment is a situation in which more people are employed on a job than the required number.

Question 4.
Production of a commodity, mostly through the natural process is an activity of which sector? (2013)
Answer:
Primary Sector

Question 5.
Name the sector in which the government owns most of the assets and provides all the services. (2013)
Answer:
Pubic Sector

Question 6.
Name the sector which continued to be the largest employer even in the year 2000. (2014)
Answer:
The primary sector continued to be the largest employer even in the year 2000.

Question 7.
How many days of guaranteed employment are provided under National Rural Employment Guarantee Act, 2005? (2014)
Answer:
100 days of employment are guaranteed under NREGA, 2005.

Question 8.
ATM is an example of which sector? (2014)
Answer:
Tertiary sector

Question 9.
Suggest any one way to create employment opportunity in the rural areas. (2015)
Answer:
Setting up a dal mill, opening a cold storage, starting or promoting honey collection are some of the ways of creating employment opportunities in rural areas.

Question 10.
Production of a commodity, mostly through the natural process is an activity of which sector? (2013)
Answer:
Primary Sector

Question 11.
Name the sector in which the government owns most of the assets and provides all the services. (2017 OD)
Answer:
Public Sector

Short Answer Questions (SA) 3 Marks

Question 12.
Explain how public sector contributes to the economic development of a nation. (2012)
Answer:
In the public sector, ownership of assets and delivery of services is under the government. The government spends huge amounts of money in providing various services to the public at reasonable costs.

The government thus contributes towards the economic development of the nation:
By development of infrastructure, i.e.,

1.    Construction of roads, national highways, flyovers, metro-rails, railway lines, irrigation through dams, etc.

2.    The government provides an impetus to industrial growth by supplying electricity at affordable rates.

3.    By running schools and providing good quality of education, the government is trying to remove illiteracy and taking the nation forward.

Question 13.
Why is NREGA also called the Right to work? Explain the objectives of National Rural Employment Guarantee Act 2005. (2015, 2014, 2013)
Answer:
Every state or region in India has potential for increasing the income and employment in that area.
Recognising this, the Central Government in India has passed an act called the National Rural Employment Guarantee Act 2005,
Main objectives of the NREGA 2005 are:

·       to implement the Right to Work in 200 districts of India.

·       to guarantee 100 days of employment in a year by the Government. In case the Government fails, it offers unemployment allowance.

·       to give preference to the type of work that will help increase the production from land.

Question 14.
With the example of sugarcane, explain the interdependence of all the three sectors of the economy. (2012)
Answer:
The primary sector involves production at the most basic level, i.e., through exploitation of natural resources. Cultivation of sugarcane is an agricultural activity which comes under the primary sector. Raw materials from the primary sector are converted into processed goods through manufacturing in the secondary sector. Using sugarcane as raw material, jaggery and sugar is made in the factories. The tertiary or service sector provides support to the process of production. It includes transportation, storage, marketing and sale of products. For instance, transportation of sugarcane from the fields to the sugar mills. Further on, the transportation of jaggery and sugar from factories and sugar mills to the markets.

The farmer (Primary sector) also needs fertilisers and seeds which are processed in some factory (Secondary sector) and which will be delivered to his doorstep by some means of transportation (Tertiary sector). In this way, for every little process there is interdependence of the three sectors of the economy on each other.

Question 15.
“The problem of underemployment is not confined only to agriculture”. Support the statement with examples. (2013)
Answer:
The problem of underemployment is not confined only to agriculture. It can also happen in other sectors.

·       For example, there are thousands of casual workers in the service sector in urban areas who search for daily employment. They are employed as painters, plumbers, repair persons and other odd jobs. Many of them don’t find work everyday.

·       Similarly, we see other people of the service sector on the street pushing a cart or selling something where they may spend the whole day but earn very little. They are doing such work only due to the lack of better employment opportunities.

·       The unorganised sector includes small and scattered units outside the government control. Employment is not secure. People can be asked to leave without any reason. When there is less work, such as during some seasons, some people may be asked to leave.

Question 16.
What are final goods and intermediate goods? How do they help in calculating (GDP) Gross Domestic Product? (2013)
Answer:
Final goods are goods that are ultimately consumed by the consumer rather than used in the production of another good.
Intermediate goods are goods used as inputs in the production of final goods and services. For example, a car sold to a consumer is a final good; components such as a tyre sold to the car manufacturer is an intermediate good. The value of final goods already includes the value of all intermediate goods that are used in making the final good.

The value of final goods and services produced in each sector during a particular year provides the total production of the sector for that year. And the sum of production in the three sectors gives the Gross Domestic Product (GDP) of a country. It is the value of all final goods and services produced within a country during a particular year.

Question 17.
Explain any three ways to solve the problem of underemployment. (2013)
Answer:
There are people who are capable of better work and earning more than what they are getting. The reason for this is that better jobs for which they are qualified are not available. Such people are termed as underemployed, e.g., a graduate teacher driving a taxi. Underemployment is most prevalent in the primary or agricultural sector.

Three ways to solve the problem of underemployment:

1.    Provision of loans may help in creating jobs for disguised unemployed and underemployed workers.
The loan money can be used for the promotion of economic activity of the family adding to the family’s earning or for setting up a cottage industry.

2.    Another way is to promote and locate industries and services in semi-rural areas where a large number of people may be employed.
Example, Setting up a dal mill, opening a cold storage, starting or promoting honey collection.

3.    If local banks give credit to farmers at a reasonable rate of interest, they will be able to buy agricultural inputs and increase productivity.

4.    Centres for vegetables and fruit processing, health centres, educational institutions, tourism and IT centres will certainly help in creating jobs.

Question 18.
Why didn’t shift out of primary sector happen in case of employment although there has been a change in the share of the three sectors in GDP? (2013)
Answer:
A remarkable fact about India is that while there has been a change in the share of the three sectors in GDP, a similar shift has not taken place in employment.

1.    A similar shift out of primary sector did not happen in case of employment because not enough jobs were created in the secondary and tertiary sectors.

2.    Even though industrial output or the production of goods went up by eight times during the period, employment in the industry went up by only 2.5 times.

3.    While production in the service sector rose by 11 times, employment in the service sector rose less than three times.
As a result, more than half of the workers in the country are working in the primary sector, mainly in agriculture, producing only a quarter of the GDP.

Question 19.
Classify the economic sectors on the basis of nature of activities. Mention the main feature of each. (2014)
Answer:
On the basis of nature of activities, economic sectors are classified into:

1.    Primary sector

2.    Secondary sector

3.    Tertiary sector

Primary sector forms the base for all other products that we subsequently make. Since most of the natural products we get, are from agriculture, dairy, fishing, forestry, this sector is also called sector for agriculture and related activities (stone quarrying, animal husbandry, etc.).

Secondary sector covers activities in which natural products are changed into other forms through ways of manufacturing. It can take place in a factory, workshop or at home.
Examples:
(a) Spinning yam from cotton fibre from plants.
(b) Making sugar from sugarcane.
It is also called the Industrial sector.

Tertiary sector. Activities in this sector do not produce any goods. This sector produces services that act as aid and support to the Primary and Secondary sectors. Services like administration, police, army, transport, hospitals, educational institutions, post and telegraph, courts, municipal corporation, insurance companies, storage, trade communication and banking are some of the examples of activities of the Tertiary sector. This sector is also known as Service sector.

Question 20.
What is meant by Gross Domestic Product (GDP)? How is GDP measured in India? (2015)
Answer:
Gross Domestic Product (GDP) of a country is the value of all the final goods and services produced in each sector within a country during a particular year. This indicates how big the country’s economy is. GDP is measured by the Central Government Ministry. This Ministry, with the help of all the Indian States and Union Territories, collects information relating to total volume of goods and services and their prices and then makes an estimate of the GDP.

Long Answer Questions (LA)

Question 21.
Describe the importance of Primary sector in the Indian economy.
Answer:
Importance of Primary sector:

1.    Primary Sector provides the basic needs of economy for food and mineral ores.

2.    It produces some of the raw materials (like jute, cotton, coal extracted from mines) for the industrial sector.

3.    The Primary sector continued to be the largest employer in the economy even in the year 2000, the reason being that Secondary and Tertiary sectors still do not create enough jobs.

4.    The agricultural population in the Primary sector provides a very large market of consumers for the Secondary sector (for buying finished products like clothes, goods of daily need, fertilizers, etc.).

Question 22.
How can we create more employment in secondary and tertiary sectors in rural India? (2012)
Answer:

1.    Investing in basic agricultural infrastructure like construction of dams and canals for irrigation can lead to a lot of employment generation within the agricultural sector itself reducing the problem of under employment.

2.    If the government invests some money in the storage and transportation of crops, or makes better rural roads so that mini-trucks reach everywhere, several farmers can continue to grow and sell these crops throughout the year. This activity can provide productive employment to not just farmers but also others such as those in services like transport or trade.

3.    Providing credit at a reasonable rate of interest to help farmers buy seeds, fertilisers, agricultural equipments, pumpsets etc. can generate employment in rural banking.

4.    The government/banks can provide loans at cheap rates to the small farmers to improve their irrigational facilities like constructing a well so that they can irrigate their land well and get two to three crops a year instead of one. Thus more people can be employed in the same field.

5.    Another way is to promote and locate industries and services in semi-rural areas where a large number of people may be employed. For example, setting up a dal mill, opening a cold storage, starting or promoting honey collection, etc.

Question 23.
Explain the importance of the service sector. (2013)
Or
Explain reasons for the rising importance of the tertiary sector in India. (2012)
Answer:
Tertiary sector or service sector plays a very significant role and its importance is rising day by day:

1.    Greater the development of primary sector and secondary sector more would be the demand for Services.

2.    Tertiary sector has become the largest producer in India because various kinds of Services such as hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, transport, banks, insurance companies, etc. are required.

3.    Even development of agriculture and industry leads to the development of services such as transport, trade and storage, etc.

4.    With the rise in income, demand for more services is rising.
For example, eating out in restaurants, tourism, malls and shopping complexes, schools, professional training, etc.

5.    New services like Information Technology and outsourcing have become very important for modem day trade and industry.
Unfortunately, the rapid growth of the service sector in India has not yet shown the expected corresponding increase in employment.

Question 24.
How can employment be increased in both rural and urban areas? Explain. (2013)
Answer:
Ways to provide more employment opportunities in rural areas:

1.    Promote and locate industries and services in semi-rural areas where a large number of people may be employed. Example, setting up a dal mill, opening a cold storage, starting or promoting honey collection.

2.    Promoting small-scale industries, small-scale manufacturing units, agro-processing industries and providing loans for the same. The government/banks can provide loans at cheap rates to the small farmers to improve their irrigational facilities so that they can get two or three crops a year instead of one. Thus more people can be employed in the same field.

3.    If more dams are built and canal water is provided to all the small farmers, then a lot of employment can be generated in the agricultural sector.

4.    If more money is spent on transportation and storage, then not only small farmers will be benefitted but many more people can be employed in transport and storage sector.

5.    Investing more in tourism and employing more youth in this sector.

Question 25.
“There are several things needed by the society as a whole”. In the light of this statement explain as to who can provide them at a reasonable cost, the private or the public sector and why? (2013)
Or
Explain any three demerits of private sector.
Answer:
Society as a whole needs several things which the private sector will not be able to provide at a reasonable cost.
Reasons for this are:

1.    Activities in the private sector are guided by the motive to earn profits and not welfare of the people,

2.    There are several services needed by the society which the private sector cannot provide at a reasonable price. Activities like construction of roads, bridges, railways, irrigation through dams etc., require huge amount of money which is beyond the capacity of the Private sector. Private sector charges high rates for the use of these services.

3.    It is difficult for the Private sector to collect money from thousands of people who use these services.

4.    The Private sector sometimes ignores regional balanced development, equality of income and development of basic industries.

5.    Private sector charges include profit margins whereas the government will charge a reasonable price for services. It is the primary duty of the government to ensure the provision of public facilities with a service motto.

Question 26.
Describe any five conditions or aspects that you would consider before accepting a job? (2014)
Answer:
Before accepting a job many factors need to be considered apart from income—

1.    These include factors such as facilities for families, working atmosphere, or opportunity to learn.

2.    In another case, a job may give less pay but may offer regular employment that enhances sense of security. Another job however, may offer high pay but no job security and also leave no time for family.

3.    The terms of employment are as per government rules and regulations.

4.    The enterprise also gives several other benefits like paid leave, provident fund, gratuity, etc.

5.    The employer also makes provisions for medical benefits and safe working environment. A safe and secure environment may allow more women to take up a variety of jobs.

Question 27.
‘There has been a big change in the three sectors of economic activities, but a similar shift has not taken place in the share of employment.’ Explain the above statement on the basis of facts. (2014)
Answer:
Though there has been a change in the share of the three sectors in GDP, similar shift has not taken place in the structure of employment. The Primary sector continues to be the largest employer even in the year 2000. The reason for this is that not enough jobs are created in the Secondary and Tertiary sectors. More than half of the workers in the country are working in the Primary sector, mainly in agriculture, producing only a quarter of GDP. In contrast to this, Secondary and Tertiary sectors produce three- fourths of the produce though they employ less than half of the people.

Reasons:

1.    During the last thirty years in the Indian economy, not enough jobs have been created in the Secondary and Tertiary sectors, although their output has increased many folds. As a result more than half of the workers in the country are working in the primary sector, mainly agriculture, causing gross underemployment due to overcrowding in the sector.

2.    There are more people engaged in agricultural activities than is necessary. The situation is such that even if we remove a lot of people from agriculture, the production of this sector will not be affected.

Question 28.
Define tertiary sector. Describe about the different kinds of people employed in this sector in India. (2014)
Answer:
Tertiary sector. Activities in this sector do not produce any goods. This sector produces services that act as aid and support to the primary and secondary sector. Services like administration, police, army, transport, hospitals, educational institutions, post & telegraph, courts, municipal corporation, banking & insurance, storage, trade and communications are examples of activities in the tertiary sector. This sector is also known as the Service Sector.

1.    The first kind of people are the highly skilled and educated people providing specialised services. E.g., doctors, lawyers, accountants, etc. There are a limited number of services that employ highly skilled and educated workers and offer big salaries.

2.    There are also a very large number of workers engaged in services, such as small shopkeepers, repair persons, transport persons. These people barely manage to earn a living and yet they perform these services because no alternative opportunities for work are available to them.
Hence, only a part of this sector is growing in importance.

Question 29.
State any five features each of public sector and private sector. (2015)
Answer:
Public Sector:

1.    The government owns most of the assets.

2.    All the services are provided by the government.

3.    The main motive of the public sector is the welfare of the people (masses). Activities are guided by the interest of the nation as a whole.

4.    Employees feel secured and there is discipline and regular work.

5.    Governments raise money through taxes and other meAnswer:

6.    For example, railways, post offices, construction of roads, bridges, harbours, dams, etc.

Private Sector:

1.    In the private sector, ownership of assets is in the hands of private individuals or companies.

2.    Services are provided or are in the hands of individuals.

3.    Activities in the private sector are guided by the motive to earn profits and not welfare of the people.

4.    Jobs of the employees are less secured and the whims of the owners are above all.

5.    Private sector charges high rates for the use of services provided by them.

6.    For example, Companies like Tata Iron and Steel Co. (TISCO), Reliance Industries, etc.

Question 30.
Explain with suitable examples how public sector contributes to the economic development of the nation. (2015)
Answer:
Role of Public sector in economic development. The Public sector is that sector of the economy in which the government owns most of the assets and provides all the services, e.g., railways, post and telegraph.

1.    It promotes rapid economic development through creation and expansion of infrastructure.

2.    The public sector provides various services and facilities like construction of roads, bridges, railways, irrigation through dams, etc. where heavy spending is required.

3.    A large number of activities are a primary responsibility of the government like schools, hospitals, housing, safe drinking water, etc.

4.    Certain activities are meant to be supported by the government, like providing electricity to small scale industries at low prices, supply of food to the poor, etc. It encourages development of small, medium and cottage industries.

5.    It ensures availability of goods and services at moderate rates and also contributes to community development through creation and expansion of infrastructure.

Question 31.
How can workers in the unorganised sector be protected? Explain giving examples of rural and urban areas.
Answer:
There is need for protection and support of the workers in the unorganised sector:

1.    In the rural areas, this sector comprises of landless agricultural labourers, small and marginal farmers, share croppers and artisans (weaners, carpenters, goldsmiths).
These farmers need to be supported through adequate facility for timely delivery of seeds, agricultural inputs, credit, storage facilities and marketing outlets.

2.    In urban areas, workers in the small scale industry, casual workers in construction, trade and transport, street vendors, head load workers, garment makers, ragpickers etc. are all a part of the unorganised sector. Small scale workers need government aid for procuring raw materials and marketing of their goods.

3.    The government must make concerted efforts to ensure that workers in this sector are not exploited and earn fair wages. They must also be provided with job security and other benefits.

Question 32.
Describe certain activities of public interest on which the government has to focus on priority basis. (Board Question)
Answer:
Activities of public interest on which the government needs to focus on a priority basis:

1.    Education. The government must provide adequate education facilities in all rural and urban areas. The government must necessarily focus on education for girls so that all girls are able to acquire atleast secondary level schooling. Running proper schools and providing quality education, particularly elementary education, is the duty of the government.

2.    Health and Nutrition,

1.    Basic health care facilities are a must for all. Establishment of government hospitals, clinics and dispensaries, especially in rural areas, to provide subsidized and unadulterated medicines to the poorer sections of society.

2.    An effective Public Distribution System—proper functioning of ration shops and equitable distribution of food grains is very essential.

3.    Transportation. A well developed public transport system to make it easy for general public to commute.

4.    Electricity. It is the duty of the government to provide electricity and water at reasonable rates to the common man and prevent him from exploitation by private companies.

Question 33.
Compare the employment conditions prevailing in the Organized and Unorganized sectors. (NCERT Question)
Answer:
Organized sector:

1.    In this sector, terms of employment are regular and people have assured work.

2.    They are registered by the government.

3.    Workers enjoy security of employment, they have to work for fixed hours, they are paid overtime and enjoy several other benefits like paid leave, payment during holidays, Provident Fund, gratuity, pension, retirement benefits, medical benefits, etc.

4.    Entities under Organized sector have to follow the rules and regulations which are given in various laws (Factories Act, Minimum Wages Act, Payment of Gratuity Act, Shops and Establishment Act).

Unorganized sector:

1.    In this sector, employment is not secure and jobs are irregular.

2.    Here government rules are not followed as they are outside the control of the government.

3.    Usually, they offer low-paid jobs, no provision for overtime, paid leave, holiday leave or sick leave.

4.    Employees can be asked to leave without any reason. One can also see a large number of under-employed workers in this sector.

Question 34.
Explain the importance of the service sector. (2017 D)
Answer:
Tertiary sector or service sector plays a very significant role and its importance is rising day by day:

1.    Greater the development of primary sector and secondary sector more would be the demand for Services.

2.    Tertiary sector has become the largest producer in India because various kinds of services such as hospitals, educational institutions, post and telegraph services, police stations, courts, village administrative offices, transport, banks, insurance companies etc. are required.

3.    Even development of agriculture and industry leads to the development of services such as transport, trade and storage etc.

4.    With the rise in income, demand for more services is rising.
For example, eating out in restaurants, tourism, malls and shopping complexes, schools, professional training.

5.    New services like Information Technology and outsourcing have become very important for modern day trade and industry.
Unfortunately, the rapid growth of the service sector in India has not yet shown the expected
corresponding increase in employment.

Question 35.
How can employment be increased in both rural and urban areas? Explain. (2017 OD)
Answer:
Ways to provide more employment opportunities in rural areas:

1.    Promote and locate industries and services in semi-rural areas where a large number of people may be employed. For example, setting up a dal mill, opening a cold storage, starting or promoting honey collection.

2.    Promoting small-scale industries, small-scale manufacturing units, agro-processing industries and providing loans for the same. The government/banks can provide loans at cheap rates to the small farmers to improve their irrotational facilities so that they can get two or three crops a year instead of one. Thus more people can be employed in the same field.

3.    If more dams are built and canal water is provided to all the small farmers, then a lot of employment can be generated in the agricultural sector.

4.    If more money is spent on transportation and storage, then not only small farmers will be benefitted but many more people can be employed in transport and storage sector.

5.    Investing more in tourism and employing more youth in this sector.

Question 36.
“There are several things needed by the society as a whole”. In the light of this statement explain as to who can provide them at a reasonable cost, the private or the public sector and why? (2017 OD)
Answer:
Society as a whole needs several things which the private sector will not be able to provide at a reasonable cost.
Reasons for this are:

1.    Activities in the private sector are guided by the motive to earn profits and not welfare of the people.

2.    There are several services needed by the society which the private sector cannot provide at a reasonable price. Activities like construction of roads, bridges, railways, irrigation through dams, etc., require huge amount of money which is beyond the capacity of the Private sector. Private sector charges high rates for the use of these services.

3.    It is difficult for the Private sector to collect money from thousands of people who use these services.

4.    The Private sector sometimes ignores regional balanced development, equality of income and development of basic industries.

5.    Private sector charges include profit margins whereas the government will charge a reasonable price for services. It is the primary duty of the government to ensure the provision of public facilities with a service motto.