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NIOS Class 10 Economics Chapter 4 Economy: Its Meaning and Types
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Economy: Its Meaning and Types
Chapter: 4
MODULE 2: ABOUT ECONOMY
TEXTBOOK QUESTIONS (SOLVED)
INTEXT QUESTIONS 4.1
Q.1. Which of the following statements are True or False?
(i) On the basis of ownership of resources, we can classify an economy as rich economy and poor economy.
Ans. False.
(ii) Socialist economy aims at maximization of social welfare.
Ans. True.
(iii) Freedom of choice, profit maximization and private property are the characteristics of a socialistic economy.
Ans. False.
(iv) In a mixed economy, public and private sectors coexist.
Ans. True.
Q.2. Fill in the blanks with appropriate words given in the bracket.
(i) Price mechanism plays ________ role in capitalist or free market economy (the most important/very limited).
Ans. The most important.
(ii) The freedom of choice is called ________ in capitalist economy. (consumer’s sovereignty/consumer surplus)
Ans. Consumer’s sovereignty.
(iii) The socialist economies are ________ economies. (centrally planned/ decentralised)
Ans. Centrally planned.
(iv) People can accumulate wealth and transfer it to their legal hairs in ________ economy. (capitalist/socialist)
Ans. Capitalist.
(v) Public sector and private sector ________ in a mixed economy. (co-exist/does not exist)
Ans. Coexist.
Q.3. Classify the following characteristics of different types of economies and put them in appropriate boxes.
Profit motive, Central Planning, Consumer Sovereignty, Public and Private Sector, Laws of Inheritance, Social Welfare, Government Regulations, Subsidy Competition, Price-mechanism, Inequalities, no class conflict, economic planning and limited freedom of choice.
Ans. Classification of Characteristics.
INTEXT QUESTIONS 4.2
Q.1. What are two categories of economy on the basis of level of development?
Ans. Two categories of economy on the basis of level of development are:
(i) Developing Economy.
(ii) Developed Economy.
Q.2. Give simple meaning of economic development.
Ans. Economic Development: Economic development is a process by which an economy’s real national income increases over a long period of time.
Q.3. Give economic factors of determination of economic development.
Ans. (i) Natural Resources.
(ii) Human resources.
(iii) Capital formation and
(iv) Technology.
Q.4. What are the non-economic factors affecting development?
Ans. (i) Caste system.
(ii) Family type.
(iii) Racial.
Q.5. What is serious drawback in income approach to development?
Ans. It does not take into account the environmental costs and resource depletion.
Q.6. Distinguish between economic growth and economic development.
Ans. Economic growth is a short-term improvement in real income whereas economic development is long-run increase in real income plus improvement in overall standard of living and quality of life.Docen
Q. 7. How is capital formation important for economic growth?
Ans. Capital formation determines the growth rate given the capital output ratio.
TERMINAL EXERCISE
Q.1. What is meant by an economy? Give the major characteristics of a capitalist economy.
Ans. Meaning of Economy: It is a system of socially and legally acceptable ways by which people get a living. An economy is also looked at as a system of cooperation for the satisfaction of human wants.
Major characteristics of a capitalistic economy are as follows:
(i) Private property.
(ii) Freedom of enterprise.
(iii) Consumer’s sovereignty.
(iv) Profit motive.
(v) Competition.
(vi) Importance of markets and prices.
(vii) Absence of government interference and central planning.
Q.2. Economy is a system of mutual and Exchange. Discuss.
Ans. Economy is a system of mutual cooperation and exchange. It is a system of cooperation for the satisfaction of human wants. It is a system by which people get a living. The aim of every economy is to satisfy human’s unlimited wants by using limited or scarce resources available in a country. These wants can be satisfied by production and consumption of goods and services. For production of goods and services many factors of production cooperate and engage themselves during the process of production. Likewise after production to supply these products are sent to the market for consumption, many factors or people are engaged. No one can perform these economic activities alone. For the fulfilment of our unlimited wants, we depend on many other people. In modern complex economy, the cooperation itself is in the form “You do this for me and I will do that for you is not enough.” The cooperation can be seen across national boundaries. Thus, economy is a system of mutual cooperation and exchange.
Q.3. Explain the types of economy on the basis of ownership and control over means of production.
Ans. On the basis of ownership and control over means of production, economy can be classified into three types:
(i) Capitalist or free enterprise economy.
(ii) or centrally planned economy..
(iii) Mixed economy.
(i) Capitalist Economy: The capitalist or free enterprise economy is the oldest form of economy. Earlier economists supported the policy of ‘laissez fair’ meaning leave free. They advocated minimum government intervention in the economic activities.
(ii) Socialist Economy: In the socialist or centrally planned economies all the productive resources are owned and controlled by the government in the overall interest of the society. A central planning authority takes the decisions.
(iii) Mixed Economy: A mixed economy combines the best features of capitalism and socialism. Thus, mixed economy has some elements of both free enterprise or capitalist economy as well as government controlled socialist economy. The public and private sectors coexist in mixed economy.
Q.4. Distinguish between economic development and economic growth.
Ans. Distinction between Economic Development and Economic Growth:
| Economic Growth | Economic Development |
| (i) Economic growth is a short-term measure and generally refers to year to year in national and per capita income in real terms. | (i) It is a long-term measure over a long period. It refers to overall rise in standard of living and a better quality of life. |
| (ii) The income index does not take into account the distributional aspects of national income. | (ii) Besides income index some non-income indices are also taken into account. |
| (iii) Income approach does not take into account the unproductive growth. | (iii) There are high life expectancy at birth, low mortality and high rate of literacy. |
Q.5. What are the main determinants of economic development?
Ans. Main Determinants of Economic Development: Following are the main determinants of economic development:
(i) Natural Resources: The availability of natural resources facilitates and accelerate economic growth and economic development. It is believed that quality and quantity of natural resources affect the rate of growth.
(ii) Human Resources: Another important determinant of economic development is the quantity and quality of human resources or the population. Other things being equal, educated and technically qualified manpower helps in achieving higher growth-rate. On the other hand, illiterate and unskilled population retards economic growth.
(iii) Capital Formation: Stock of capital is crucial for rapid economic growth. For increasing the stock of capital, rate of savings must be high. The savings must be invested. Given the rate of savings and investment, the rate of growth will depend upon capital-output ratio. If the domestic savings are not sufficient government can seek external assistance to increase capital-formation, and growth-rate in developing countries.
(iv) Technology: Technology plays an important role in the economic development. Technological progress depends upon continuous research and development. Through technological process a nation may overcome other constraints such as scarcity of natural resources and low productivity. Developed economies invest in its human capital.
SOME IMPORTANT QUESTIONS FOR EXAMINATIONS
VERY SHORT ANSWER TYPE QUESTIONS
Q.1. What is an economy?
Ans. An economy is a system of socially and legally acceptable way by which people get living.
Q.2. What medium of exchange is used in modern complex economies?
Ans. Money.
Q.3. Which type of organisation is an economy?
Ans. An economy is a man-made organisation.
Q.4. On what base the economy is classified into capitalist, socialist or mixed economy.
Ans. On the basis of ownership of resources i.e. factors of production, economy is classified into capitalist, socialist or mixed economy.
Q.5. Which is the oldest form of economy?
Ans. The capitalist is the oldest form of economy.
Q.6. What does the policy of “Laisses fair” mean?
Ans. The policy of “Laisses fair” means leave free.
Q.7. In capitalist, there is consumer’s sovereignty. What does it mean?
Ans. It means that in capitalist economy, consumer is like a king. He has the full freedom to spend his income on goods and services that given him maximum satisfaction.
Q.8. Which is the guiding principle in capitalism?
Ans. Self-interest is the guiding principle in capitalism.
Q.9. Who did determines the price of a commodity in a capitalist economy?
Ans. The forces of demand and supply in an industry determine the price of a commodity.
Q.10. Name any three which are known as capitalistic countries.
Ans. (i) USA.
(ii) UK. and
(iii) France.
Q.11. What is the other name of socialist economy?
Ans. The other name of socialist economy is centrally planned economy.
Q.12. Who owns means of production in a socialist economy?
Ans. In a socialist economy, the government owns the means of production on behalf of public.
Q.13. In which economy, the institution of private property is abolished?
Ans. The institution of private property is abolished in a socialist economy.
Q.14. Name any two countries which are said to be socialistic countries.
Ans. (i) Russia. and
(ii) China.
Q.15. Name that economy which combines the best features of capitalism and socialism.
Ans. A mixed economy.
Q.16. What does the private sector consist of?
Ans. Private sector consists of production units which are owned privately and work on the basis of profit motives.
Q.17. What does the public sector consist of?
Ans. The public sector consists of production units which are owned by the government and work on the basis of social welfare.
Q.18. Why is Indian economy considered as a mixed economy?
Ans. Indian economy is considered a mixed economy as it has well defined areas for functioning of public and private sectors and economic planning.
Q.19. Why USA and UK which are known as capitalist countries are also called mixed economies now?
Ans. Because of active role of their government in economic development.
Q.20. Classify the economies on the basis of level of development.
Ans. (i) Developed Economy. and
(ii) Developing Economy.
Q.21. Out of developed economies and developing economies, which economies have highly educated human resources?
Ans. Developed Economies.
Q.22. Out of developed economies and developing economies, which economy have high infant mortality rate?
Ans. Developing economies have high infant mortality rate.
Q.23. What is economic growth?
Ans. Economic growth is a sustained increase in national income.
Q.24. What is economic development?
Ans. Economic development includes not only economic growth, but also various other economic changes that improve quality of life or standard of living in a country.
Q.25. Out of economic growth and economic development which is a much broader concept?
Ans. Economic development is a much broader concept.
Q.26. State the economic factor determining the economic development.
Ans. (i) Natural Resources.
(ii) Human Resources.
(iii) Capital Formation.
(iv) Technology.
Q.27. State the non-economic factors determining the economic development.
Ans. (i) Caste system.
(ii) Family type.
(iii) Racial factor. and
(iv) Government policies.
Q.28. What is the most commonly used index of economic development?
Ans. Increase in per capita income.
Q.29. Is harm caused by deforestation shown as a negative entry into the national accounts statistics?
Ans. No.
Q.30. Out of economic growth and economic development, which takes into account some non-economic indices along with income index?
Ans. Economic development.
Q.31. Write down any three non-income indices which are taken into account for measuring economic development.
Ans. (i) High life expectancy at birth.
(ii) Low rate of infant mortality. and
(iii) High rate of literacy.
Q.32. What does an improvement in non-factor indices imply?
Ans. It implies that the quality of life has
Q.33. What is the objective of development?
Ans. Objective of development is meeting needs of vast masses of population.
Q.34. Which index has been emphasised by the United Nations Development Programmes measuring economic development?
Ans. Human Development Index (HDI).
Q.35. On what base is Human Development Index based?
Ans. Human Index Development is based on per capita income, educational attainment and life expectancy.
Q.36. Classify the following countries into developed economies and developing economies:
(i) India.
(ii) Pakistan.
(iii) UK.
(iv) USA.
Ans. India and Pakistan are developing economies whereas UK and USA are developed economies.
Q.37. In which type of economy, there is class-conflict?
Ans. Socialist economy.
Q.38. Economic undertaken under what type of economy.
Ans. Under mixed economy.
Q.39. In which type of economy, consumer is sovereign?
Ans. In capitalist economy.
Q.40. In what type of economic system does the government set the goals and firms try to meet the goals?
Ans. In planned economic system.
Q.41. In which type of economy where people who have money can satisfy their wants and people who do not money cannot afford to buy things?
Ans. In the market economy (capitalistic economy).
Q.42. In which type of economy, the government decides to produce the goods and services which it thinks people should have and not what people think they should have?
Ans. In planned economy.
Q.43. Give the full form of HDI.
Ans. Full form of HDI is Human Development Index.
Q.44. In agriculture land, we still grow only one Crop? Is it a good sign? Give reason in support of your answer.
Ans. No, it is not a good sign as the resources are already scare.
Q.45. On what basis the countries are labelled developed (rich) and developing (poor) countries?
Ans. The countries are labelled developed (rich) and developing (poor) on the basis of real national and per capita income and standard of living.
Q.46. What may happen with the economic growth, if the fruits of growth are snatched by the richer section of society?
Ans. The rich may get richer while poor may get poorer.
Q.47. Name the indices which are taken into account while measuring the economic development.
Ans. Following indices are taken into account while measuring economic development:
(i) National and per capita income in real.
(ii) Life expectancy at birth.
(iii) Low infant mortality rate.
(iv) High rate of literacy.
SHORT ANSWER TYPE QUESTIONS
Q.1. What is the drawback of increase in per capita income as an index of economic development?
Ans. It does not take into account the consumption of natural resources and environmental degradation such as the smoke from the industries or the pollution caused by various industrial waste and by products in the air and water resources.
Q.2. Give one point of difference between economic growth and economic development.
Ans. Economic growth is a short term measure and generally refers to year to year rise in national and per capita income in real term, whereas economic development is a long term measure over a long period and generally refers to overall rise in standard of living and a better quality of life.
Q.3. Which basic needs are included by UNESCO and ILO as an index of economic development?
Ans. (i) Availability of food.
(ii) Clothing and shelter.
(iii) Availability of drinking water.
(iv) Availability of sanitation and public transport facilities.
(v) Health. and
(vi) Education.
Q.4. Write down any three important characteristics of a capitalist economic system.
Ans. Three Characteristics: (i) Only those goods and services are produced which are wanted by consumers.
(ii) Maximum quantity of goods are produced at the minimum cost per unit.
(iii) Goods and services are produced for those who can buy them.
Q.5. Write down the main features of planned economic system.
Ans. Main Features of Planned Economic System:
(i) A central planning authority of the government decides what to produce, how to produce and for whom to produce.
(ii) The planning authority sets the production target.
(iii) In planned economic system the government produces the goods which everybody needs.
(iv) Planned economic system does not allocate the resources in the must ideal manner.
Q. 3. Write down the features of a mixed economic system.
Ans. Features: (i) In mixed economic system, there is a combination of government planning with the free market economy.
(ii) There are two sectors-(a) Private sector and (b) Public sector.
(iii) The choice of goods and services to be produced by the private sector depends on the basis of profit motive.
(iv) The choice of goods and services to be produced by the public sector depends on the needs and requirements of the people.
(v) This system continues the efficiency of production with the justice of continuation.
