Economics

social science
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Here are the solutions, questions, answers, and notes of chapter 16: Economics which is a part of social science class 9 syllabus of 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 which are related to production, distribution and consumption of wealth are called economic activities.

Different countries have different forms of economies and thus economy does not have a singular form in every country of the world. In some countries, the main source of income for the people is agriculture and therefore they are called agricultural economies. Some economies of 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 economy of India has 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 which owns most of the means of production. China’s economy is called a socialist economy. In India, we have both private companies as well as government which 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.

I. Choose the correct answer.

1. When was the Planning Commission established?

Ans: a) 1950

2. An important feature of a capitalist economy is:

Ans: c) Free and perfect competition.

3. What kind of Economy is practised in India?

Ans: c) Mixed Economy

4. Which of the following is not one of the features of a Capitalist Economy?

Ans: d) State control of the economy

5. What is the contribution of the Tertiary Sector in India’s GDP?

Ans: a) 53.66%

6. Which of the following is not one of the characteristics of a Developed Economy?

Ans: d) Low standard of living

II. Very Short Answer Type Questions

1. What is an economic activity?

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

2. Define production.

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

3. What do you understand by consumption?

Ans: Use of goods and services for satisfying human wants is called consumption.

4. 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.

5. 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.

6. Define a closed economy.

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

7. 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 on all economic activities of the country.

8. Define the term capitalism.

Ans: Capitalism is a form of economic organisation in which means of production viz., land and capital are owned by private people.

9. Define the term socialism.

Ans: Socialism is a system of economic organisation where factors of production are owned and controlled by the government.

10. 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.

11. Define an underdeveloped economy

Ans: The economy in which the level of per capita income is low and the standard of living of the people is low is called an underdeveloped economy.

12. What is the guiding principle of a capitalist economy?

Ans: Profit motive is the guiding principle of a capitalist economy.

III. 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 to sell the 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 a 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 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 are administered prices.

IV.Greater welfare.

V. Protects the interest of workers.

VI. Reduction of inequality of incomes.

4. State three characteristics of underdeveloped countries.

Ans: The characteristics of underdeveloped economic 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 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. Technological backwardness: In underdeveloped countries technique of productions 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: 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. India’s economy is a ‘mixed economy.’ Give two arguments in support of your answer.

Ans: India’s economy is a mixed economy because firstly, there is the coexistence of the public and private sectors. Secondly, the strategic and basic industries are being run under the public sector. Also, there is a huge private sector under which a large number of industries are being managed. Market mechanism occupies a prime position in the Indian economy but market mechanism is not allowed to work freely. It is subjected to government control and regulations.

7. Distinguish between private and public sector.

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

Private sectorPublic 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.

8. Mention the economic activities which constitute the primary sector.

Ans: The economic activities which constitute the primary sectors are: Agriculture, forestry, hunting, lumbering, fishing etc.

9. State three causes of poor performance of public sector undertakings in India.

Ans: Three causes of poor performance of public sector undertakings in India are:

I. A large number of public sector enterprises have operated at less than 50% of their installed capacity.

II. Another problem of these enterprises relates to planning and construction of projects. The actual cost of the projects far exceeded the original estimates.

III. The projects took much longer time to complete than originally expected.

IV. Public sector enterprises are often plagued with undue political interference in their day to day working.

V. There is lack of incentive in public sector undertakings for ordinary workers and officials.

VI. Public enterprises generally do not aim at profit-maximisation. They are established to achieve twin objectives of social welfare and economic development.

V. Public sector’s workers/employees are indisciplined and corrupt.

VI. Over-staffing is a common feature in public sector undertakings.

IV. 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 as 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 at 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 sector has increased the per capita income.

Agricultural progress: Indian economy is an agrarian economy. 66% of the Indian population are engaged in agricultural activities. Green revolution in agriculture has made India self-sufficient in food grain production.

Industrial progress: There is 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. ‘Indian economy is a dualistic economy.’ Discuss this statement.

Ans: Presently, the structure of our economy is dualistic in nature. By dualistic economy structure, we mean that the existence of the 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 technique are employed. Dualism exists in all sectors of the Indian economy. For example, in agriculture, we find the latest technology at work along with the old technique of production. Similarly, we have a substantially large modern organised sector of industries which produces highly sophisticated goods of international standards but we also see the old artisans and handicrafts.

4. 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% gross domestic savings.

iv. Agriculture, the largest occupation in the private sector in India contributes 29% towards the economy and provides employment to 66% of the total working population.

v. Almost the entire training activities are managed by the private sectors.

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

5. Distinguish between a capitalist economy and socialist economy.

Ans:

Capitalistic economySocialist 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.

6. Compare and contrast between socialist economy with mixed economy.

Ans:

Socialist economy Mixed economy
i. Means of production are owned and managed by the government. i. Means of production are owned by the state as well as by private people.
ii. Economic activities are guided by the motive of social welfare. ii. Economic activities of enterprises are guided by both social motive and profit.
iii. All economic decisions are taken by the government through economic planning. iii. Price mechanism and economic planning, both work side by side.
iv. Inequalities of income a relatively very small. iv. Economic inequality is there but national income is not highly unequal.
v. Economic fluctuations have no place here. v. Economic fluctuations are found here.
vi. There or no class distinctions between the haves and the have-nots. vi. There is a low degree of class conflict.

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

Ans: Yes, the system of 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.

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