Rajasthan Board RBSE Class 11 Economics Chapter 3 Economy or Economic System
RBSE Class 11 Economics Chapter 3 Text book Questions
RBSE Class 11 Economics Chapter 3 Multiple Choice Questions
Question 1.
Capitalist economy is such economy in which :
(a) There is public ownership of property.
(b) There is equality in distribution of income.
(c) There is private property.
(d) The planning system is effective.
Answer:
(c) There is private property.
Question 2.
A major objective of capitalist economy is :
(a) Welfare of workers
(b) Economic equality
(c) Maximizing private profit
(d) Establishment of socialism
Answer:
(c) Maximizing private profit
Question 3.
Which of these is the oldest system of economic organization?
(a) Socialist
(b) Mixed
(c) Communist
(d) Capitalist
Answer:
(d) Capitalist
Question 4.
Which of these is a possible threat of capitalist economy?
(a) Class struggle
(b) Increase in trade cycles
(c) Economic exploitation
(d) All of these
Answer:
(d) All of these
Question 5.
Socialist economy :
(a) Is a planned economy
(b) Is an unplanned economy
(c) Has a pricing mechanism
(d) Is an economy with private ownership on sources of production
Answer:
(d) Is an economy with private ownership on sources of production
Question 6.
Major objective of socialist economy is :
(a) Personal profit
(b) Increase in employment
(c) Increase in national income
(d) None of these
Answer:
(b) Increase in employment
Question 7.
Which of these is not a characteristic of socialist economy?
(a) Centralized planning
(b) Role of pricing system
(c) Maximum social welfare
(d) Government ownership on sources of production
Answer:
(b) Role of pricing system
Question 8.
Who exercises control on sources of production in a mixed economy?
(a) The government
(b) Private person
(c) Private and government both
(d) None of these
Answer:
(c) Private and government both
Question 9.
In a mixed economy, central problems are solved by :
(a) Pricing mechanism .
(b) Centralized planning
(c) Centralized planning and pricing system
(d) None of these
Answer:
(c) Centralized planning and pricing system
Question 10.
On the basis of per capital income, World Bank has divided the economies into how many types?
(a) Two
(b) Three
(c) Four
(d) Five
Answer:
(c) Four
RBSE Class 11 Economics Chapter 3 Very Short Answer Type Questions
Question 1.
What is economy or economic system?
Answer:
The institutional structure, under which, all economic activities, related to consumption, production, exchange, distribution and of revenue are conducted, is called economic system.
Question 2.
Write the names of any three countries of the world which have capitalist economy.
Answer:
- United Kingdom
- Australia
- United States of America
Question 3.
Write the names of any two countries of the world which have socialist economy.
Answer:
- China
- Cuba
Question 4.
What is the meaning of developed economy?
Answer:
The develoved economy is that economy in which economic growth is rapid and the per capita income and national income levels are high.
Question 5.
What is the meaning of developing economy?
Answer:
The developing economy is that, in which the real per capita income is lower than the current per capita income of developed countries.
RBSE Class 11 Economics Chapter 3 Short Answer Type Questions
Question 1.
Which are the major elements of an economy?
Answer:
The main elements of the economy are production, consumption, exchange, and distribution, which relate to the life and livelihood of an individual and the group, and continue throughout life.
Question 2.
What are the major characteristics of an under-developed economy?
Answer:
The salient features of an under-developed economy are:
- In the developing nations, national income and per capita income levels are lower than that of the developed economies.
- The lower per capita income levels in under-developed or developing countries lead to the lower standard of living.
- In the under-developed countries, about 30% to 70% population depends on agriculture. Despite being dependent on agriculture, low the level of agricultural development is also a feature of the developing economy.
- There is a vicious cycle of poverty in the under-developed countries. Due to low level of income per person and income inequality, widespread poverty is found.
Question 3.
Mention the various forms of economic system.
Answer:
The various forms of economic system are as follows
- Based on the ownership of sources of production :
- Capitalist economy
- Socialist economy
- Mixed economy
- Based on the level of development :
- Developing economy
- Developed economy
Question 4.
What is the meaning of mixed economy?
Answer:
Mixed economy is that economy in which there is reasonable co-existence of private and public sectors. Working of both are controlled and determined by the government in such a manner that both of them join hands together and maximize the pace of rapid economic growth and maximum social welfare work.
Question 5.
What is the meaning of capitalist economy?
Answer:
A system in which private ownership exists and financial decisions are taken privately, is called capitalist economy.
Question 6.
Differentiate between developing economy and developed economy.
Answer:
Difference between developing economy and developed economy
| S. No. | Developing Economy | Developed Economy |
| 1. | In this, economic development is often slow. | Economic growth in this is rapid. |
| 2. | Levels of per capita income and national income are low. | Levels of per capita income and national income are very high. |
| 3. | Technically backward. | Technically advanced. |
| 4. | There is considerable dependence on agriculture. | The importance of industries and non- agricultural sectors is paramount. |
| 5. | Lack of efficient management of human resources and consumption is found. | Human resources are managed and consumed efficiently. |
RBSE Class 11 Economics Chapter 3 Long Answer type Questions
Question 1.
Describe the characteristics of mixed economy. Also mention the extent to which this economy is a mixture of advantages of capitalist economy and socialist economy.
Answer:
Following are the characteristics of mixed economy :
- Coexistence of public and private sector :
The most important characteristic of this economy is that both public and private sectors coexist in this. Both the sectors work together. Industries of national importance, such as, infrastructural industries, arms and ammunition industry, electricity, etc. operate under the public sector, while consumer industries, cottage industries, agricultural industries, etc. operate under the private sector. The major objective is extending mutual cooperation to one another as these industries are complementary to each other in economic development. - Private property economic and economic equality :
On one hand, an individual has the freedom to accumulate and own private property, while, on the other hand, the government also forms strict policies to maintain equality in distribution of income and wealth. On one hand the government levies income tax, property tax, etc. on private property and establishes its control and on the other hand, it provides welfare schemes such as old-age pension, basic facilities, etc. to poor people. - Price mechanism and imperative control :
Both, price mechanism and imperative control operate in mixed economy. Through price mechanism, powers of demand and supply operate the economy. Determination of price of goods is done through demand and supply. Major economic decisions, such as what should be produced, in what quantity, how it should be produced and for whom it should be produced, etc. are made by price mechanism. - Motive of personal benefit and social welfare :
A mixed economy operates taking in view both objectives, i.e. motive of personal benefit and social welfare. Production is done with the motive of earning profit, and just like socialist economy, the major objective of planning system is optimum social welfare. If private industries do not work for public welfare then the government nationalizes them and transfers them from private sector to public sector. - Controlled economy :
In order to maintain equal distribution of income in the economy, various policies such as levying progressive taxes, undertaking works of social security, controlling monopolistic tendencies, etc. are adopted. Maximum limit on land ownership is also determined. - Economic planning :
In a mixed economy, socio-economic objectives are obtained through economic planning. In the absence of planning, no economy can be considered to be a mixed economy, even if government interference and control exist in it. Major economic decisions are taken through planning itself.
Merits of both, socialism and capitalism are found in mixed economy as can be noted as follows:
- Adequate security :
In mixed economy, an individual enjoys adequate security in economic sphere-an individual can spend his income freely, and can choose any occupation according to his interest and qualification. Freedom of obtaining personal benefit and owning property exists to a certain limit. Barring prohibited areas, an individual is free to start any business as per his discretion. - Decline in economic disparity :
Economic disparity is a curse for any economy. The government imposes progressive taxes to decrease economic disparity in mixed economy. It makes efforts to check monopolistic tendencies, so that economic equality may be established in the society. - Efficient division of resources :
In mixed economy, both public and public sectors work jointly and try to use the resources in an optimum manner. The private sector tries to make optimum use of these resources with the motive of earning profit. The public sector uses these resources with the objective of maximizing social welfare. Therefore, a mixed economy establishes coordination and balance between personal benefit and social benefit. - Economic equality :
In mixed economy, effort is made to obtain the objective of economic equality without sacrificing economic freedom. Check is imposed on increasing prosperity of the private sector, and efforts are made to establish social security and economic equality in its place. - Protection from exploitation :
Mixed economy makes efforts to free the poor and middle class of the society from monopolistic tendencies and the exploitation perpetrated by the landlords. It forms welfare schemes for private workers and farmers. It forms laws and develops cooperation between various socio-economic groups. - Planned and rapid economic development :
Indeed, price mechanism does work in a mixed economy, but not in complete freedom. Appropriate surveys regarding the availability of resources in the country is done, planning is done about how to use them and their partnership in economic development is fixed. As the public sector plays an important role, balanced economic development of the country takes place and capital formation gains momentum.
Question 2.
What is the meaning of socialist economy?
Answer:
Due to several demerits of capitalist economy, a new form of economy emerged, which is known as socialist economy. Economies of various countries of the world, such as Cuba, China, Vietnam and others, are known as socialist economies. In such economies the government controls and operates major economic activities for social welfare. Socialism has been defined by various economists in their own way.
Meaning :
Socialism is an economic system in which there is ownership and control of the government (entire society) on the major sources of production and distribution and on the basis of equal partnership these resources are used for optimum social welfare.
Definition :
Following are the definitions of socialism:
According to Professor Leftwich :
“In socialism, the role of the government is centralized or a major one. It owns the sources of production and provides direction to economic activities.”
In context to socialism, Joad has written that, ” Socialism is like a hat that has lost its shape because everybody wears it”. This means that socialism is multilateral in nature. Government interference is omnipotent in socialism. The state controls the economy in an influential way and conducts it:
Question 3.
Describe the characteristics of capitalist economy. What are its major advantages and disadvantages?
Answer:
Capitalist economy is an economic system which allows private property and in which financial decisions are taken privately.
Characteristics of capitalist economy :
- Right to private property :
In a capitalist system, every individual has the absolute right to own private property and to use it according to his wish. Private property can be also bequathed to his heirs after his death. - Economic freedom :
In capitalism, a person has the freedom to use his property in any manner he wants, and also to select his enterprise. - Consumers’ sovereignty :
In this economy, the sovereignty of the consumer is of special importance. The consumer is free to consume according to his interest and priority, and capability. - Objective of earning personal profit :
In a capitalist economy, earning personal profit is the chief objective. No economic activity is done without motivation of personal profit. - Competition :
In capitalism, competition is seen among buyers and sellers in commodity markets and resource markets. - Pricing structure/mechanism :
In a capitalist economy the conduct, coordination and control of all economic activities is done by price mechanism, and not by any central authority.
Following are the merits of capitalist economy :
- Efficient production :
Due to the motive of earning maximum profits and existence of absolute competition in the market, every entrepreneur tries to produce a better and more durable item as compared to another entrepreneur and uses ever-new techniques for this purpose. He also tries to minimise the cost of production thus, to maximise the profit. - Flexibility :
Flexibility is an important characteristic of this type of economy. It has the capability of moulding itself in any way according to the need of time. - Development of the individual :
Every individual makes efforts to increase his qualification and abilities in this competitive market because success is attained by the best person in trade. - Increase in standard of living :
In capitalist economy, due to variation in products and items, the producer starts doing production on a large scale, due to which his cost of production starts to decrease and he sells the products at a lower price in the market. Due to this the standard of living of poor people increases. - Optimum use of resources :
In a capitalist economy, the ultimate objective of the producer is increase in profits, therefore all the sources which are available in the economy are used in an optimum way and there is no misuse or wastage of resources. - Automated :
Price mechanism plays an important role in working of this economy. There is no type of external interference in this economy. - Technical advancement :
Mutual competition exists between producers in a capitalist economy. Every producer wishes to produce maximum products at minimum cost, and for this, he uses the latest techniques of production. Capital formation is encouraged due to this.
Disadvantages of capitalist economy :
Its major defects are the following:
- Unequal distribution of income and wealth :
Inequality is seen in the distribution of income and wealth in this economy. This inequality arises due to private property, free competition, desire to earn maximum profit, etc. The rich become richer, and the poor become poorer. - Class struggle :
Due to inequality in income and wealth, the society is divided into two classes- one, the wealthy class and two, the poor class. The rich class lives a luxurious life, while the poor class finds it difficult to earn two square meals. This situation later on gives rise to class conflict. - Business cycle and economic instability :
Because of being automated, the economy witnesses continuous ups and downs. Sometimes business becomes bullish while at other times, deperssion sets in. This results in great fluctuations in production and prices. - Unemployment and social insecurity :
Due to existence of business cycles in a capitalist economy, the state of unemployment is created. Labourers/workers have no jobs and they become dependent on the wealthy class. Due to unequal distribution of wealth, their level of income drops and insecurity always remains in their life. - Exploitation :
The exploitation of workers happens the most in a capitalist economy. Because of their marginal productivity, they do not receive fair wages in this system. They only get subsistence wages.
Question 4.
Mention the advantages and disadvantages of mixed economy. Why is Indian economy known as mixed economy?
Answer:
Following are the advantages of mixed economy :
- Adequate security :
In mixed economy, an individual enjoys adequate security in economic sphere – an individual can spend his income freely, and can choose any occupation according to his interest and qualification. Freedom of obtaining personal benefit and owning property exists to a certain limit. - Decline in economic disparity :
Economic disparity is a curse for any economy. The government imposes progressive taxes to decrease economic disparity in mixed economy. It makes efforts to check monopolistic tendencies, so that economic equality may be established in the society. - Efficient division of resources :
In mixed economy, both public and private sectors work jointly and try to use the resources in an optimum manner. The private sector tries to make optimum use of these resources along with the motive of earning profit. The social sector uses these resources with the objective of social welfare. - Economic equality :
In mixed economy, effort is made to obtain the objective of economic equality without sacrificing economic freedom Check is imposed on increasing prosperity of the private sector, and efforts are made to establish social security and economic equality in its place. - Freedom from exploitation :
Mixed economy makes efforts to free the poor and middle class of the society from monopolistic tendencies and exploitation by the landlords. It implements welfare schemes for private workers and farmers. It forms laws and develops cooperation. - Planned and rapid economic development :
Indeed, price mechanism does work in a mixed economy, but it is not provided complete freedom. Appropriate survey regarding the resources available in the country is done, planning is done about how to use them and their partnership in economic development is fixed. As the public sector plays an important role, balanced economic development of the country takes place and capital formation gains momentum.
Demerits of mixed economy :
Following are the disadvantages of mixed economy
- Difficulty in appropriate implementation :
A mixed economy is formed by combining both, capitalist economy and socialist economy, and both of these have contradictory’ beliefs. Therefore, difficulty arises in their appropriate implementation. Neither economic planning is able to work well for this economy, nor does the infrastructure work well. - Unstable economy :
Instability is present in mixed economy. The private sector makes the public sector useless, and the economy gets transformed into a capitalist economy. Sometimes the public sector becomes powerful to such an extent that it eliminates the private sector, due to which socialist economy gets established. - Incapable planning :
In a mixed economy, a very large part of the economy remains out of government control and this part works for its personal greed and thus it becomes a major obstacle in success of plans. The public sector becomes unable to fulfill its objectives. - Corruption :
Corruption is found to exist in a large extent in mixed economy. Political parties misuse the public sector for their personal greed and the private sector adopts the path of corruption to break laws continuously in order to break loose from government control for its personal benefit, due to which economic development is hindered. - Black money :
Another disadvantage of mixed economy is that this economy encourages black money Due to being a democracy, it becomes possible to form such laws over here which give birth to inequality of income in the economy. On one hand, there is excessive imposition of taxes, and on the other hand, tax evasion takes place, due to which black money increases in the economy. - Threat to democracy :
Economic planning and government policies can gradually eliminate economic democracy. There is always a fear of emergence of dictatorship in the economy. In fact, this is only an apprehension. In a democracy, the actual power vests with the public at large.
Indian Economy – A mixed economy :
India became a mixed economy after the industrial policy of 1948 and the first five-years plan. Industries were categorically divided in the industrial policies of 1956, 1977 and 1991. In the first five-year plan of India, developmental programmes and objectives were separately determined for both private and public sector. In 1954, inspired by the objective of establishment of a socialist society, the important role of public sector in economic development was understood and rapid industrialization took place.
In India, planned developmental policies implemented in a span of around 60 years resulted in rapid economic development, elimination of unemployment, check on centralization of economic power, balanced industrial development, agricultural development and increased social welfare, etc. Professor K.N. Raj has written that, “Although Indian economy is a mixed economy, yet the elements of mixed economy have retained it in the form of a capitalist economy and not as a socialist economy.”
Question 5.
Describe the advantages and disadvantages of socialist economy.
Answer:
Socialism is such form of economic system in which there is ownership and control of the government (entire society) on the majore sources of production and distribution and on the basis of equal partnership, these resources are used for optimum social welfare.
Following are the main advantages of socialist economy :
- Optimum use of economic resources :
In socialist economy, all the natural and human resources are used by centralized planning. In socialist economy, the objective of centralized planning is maximizing social welfare and social security. - Freedom from business cycles :
Socialist economy is a planned economy, therefore ups and downs are less in this economy as compared to free-market economy. The government uses the resources in a planned way, while keeping in mind the objective of social security and maximum welfare. Therefore, there is less possibility of briskness or slump in economy. - Rapid economic development :
Planning Commission is the major decision maker in this economy. It establishes coordination in resources of the economy in a skilled way and therefore the pace of development of the economy increases rapidly. Another reason for economic development is the participation of all. - Better solution of fundamental problems :
In this economy, solution of problems such as what has to be produced, in what amount, etc. is done by centralized planning. Here, the government has complete freedom to produce necessary goods and services according to the quantity required by making optimum use of existing resources and keeping in mind the welfare of the society. - Balanced development :
In this economy, the objective of planning authority is economic development, but along with this, the authority makes such efforts that the development of the state may be balanced. All the regions and areas of the state should be equally developed. - Absence of class struggle and exploitation :
Equality is the principle basis of socialist economy. Capitalists and labour class do not exist separately. Therefore, strikes, lockouts, etc. are not experienced in this economy as compared to capitalist economy. - Economic equality :
Inequality of income and wealth does not exist in socialist economy because here, the decisions regarding distribution of income is taken by a central organization over here. Increased taxes are levied on rich section, while for the purpose of development of low income group, services are made available to them free of cost.
Following are the main disadvantages of socialist economy :
- Defective distribution of sources of production :
Professor Hayek has written that, “In a socialist economy, distribution of resources is done in an arbitrary manner due to the lack of pricing mechanism”. The principal basis of this is that a price mechanism itself distributes the sources of production among important industries. In socialist economy, due to absence of free-market system and lack of price mechanism, distribution of sources cannot be done in a sensible manner. - Elimination of sovereignty of the consumer :
Consumers play an important role in context of the demand in a capitalist economy. But in socialism,the sovereignty of consumer almost comes to an end. Decisions such as what has to be produced, in what quantity, etc. are taken by central planning authority here. The central planning authority takes such decisions while keeping in mind the requirements of the consumers. But, those goods and services which the consumers actually want are not available in the economy. The central planning authority’s decision regarding production has to be accepted by all the sections. - Lack of personal motivation :
Personal benefit and right of owning private property are such elements which motivate an individual to work harder. Both these elements are absent in socialist economy. Nowadays, new experiments are being conducted in socialist economy to overcome this drawback. - Lack of productivity and skillfulness :
In capitalist economy, the major objective of the producer is obtaining maximum profits. Therefore, he makes efforts to maximize production at minimum costs, but in socialist economy, neither the sources are distributed sensibly, nor the motivation of personal benefit exists, due to which, lack of productivity and skillfulness is found here. - Bureaucracy :
Another important demerit of socialist economy is presence of bureaucracy. In this economy, the most important system which takes decision is the central authority. Officials are employed to implement its decisions and they have no personal interest in it. - Centralization of power :
Some scholars are also of the view that due to excessive centralization and planning system existing in socialist economy, manpower is misused. Such manpower, which could be employed directly in production activities, is employed in making plans, performing analysis and looking after implementation.
RBSE Class 11 Economics Chapter 3 Other Important Questions
RBSE Class 11 Economics Chapter 3 Objective Type Questions
Question 1.
The mandatory processes of the economy is
(a) Production
(b) Consumption
(c) Investment
(d) All of these
Answer:
(d) All of these
Question 2.
The net increase in the amount of capital in the current year as compared to the previous year is called
(a) Consumption
(b) Investment
(c) Production
(d) None of these
Answer:
(b) Investment
Question 3.
Into how many parts is the economy distributed on the basis of development
(a) Two
(b) Four
(c) Three
(d) Five
Answer:
(a) Two
Question 4.
In which century was the capitalist system born?
(a) 19th
(b) 18th
(c) 15th
(d) 16th
Answer:
(b) 18th
Question 5.
The economy of United kingdom is-
(a) Socialist
(b) Mixed
(c) Capitalist
(d) All of these
Answer:
(c) Capitalist
Question 6.
The individual benefit objective is present in-
(a) Socialist economy
(b) Mixed economy
(c) Capitalist economy
(d) None of these
Answer:
(c) Capitalist economy
Question 7.
A quality of capitalist economy is-
(a) Skillful Production
(b) Elasticity
(c) Development of person
(d) All of these
Answer:
(d) All of these
Question 8.
Exploitation is the defect of which economy?
(a) Capitalist
(b) Socialist
(c) Mixed
(d) None of these
Answer:
(a) Capitalist
Question 9.
Which economy is government owned?
(a) Socialist
(b) Mixed
(c) Capitalist
(d) None of these
Answer:
(a) Socialist
RBSE Class 11 Economics Chapter 3 Very Short Answer Type Questions
Question 1.
How many essential processes are there on an economy?
Answer:
There are three essential processes in an economy.
Question 2.
What are the three essential processes of economy?
Answer:
Production, consumption and exchange.
Question 3.
What is production?
Answer:
Production involves the manufacture or production of goods and services.
Question 4.
On which factors does production depend?
Answer:
Production depends on demand, skill, techniques of production and quantity of available economic resources.
Question 5.
What is meant by investment?
Answer:
Investment refers to the net increase in amount of capital (stock) in the present year as compared to the previous year.
Question 6.
What is included in the economic system?
Answer:
Economic system includes those customs, rules and institutions that are incorporated for running the economy.
Question 7.
Why does the arrangement of exchange’ procedures needs to be made?
Answer:
In the economy, the consumer has to be given the freedom of choice, for which the exchange process has to be arranged.
Question 8.
On how many bases has the economy been classified?
Answer:
The economy has been classified on two bases.
Question 9.
What are the two bases of the classification of economy?
Answer:
- On the basis of ownership
- On the basis of development
Question 10.
When was the capitalist economy born?
Answer:
After 18th century.
Question 11.
Where was the capitalist economy born?
Answer:
In England and Europe
Question 12.
Define the capitalist economy?
Answer:
A system in which there is private ownership of the resources of production and financial decisions are taken privately is called capitalist economy.
Question 13.
What is the economy called in which the means of origin and distribution are privately owned and controlled?
Answer:
Capitalist economy.
Question 14.
Write two advantages of capitalist economy.
Answer:
- Efficient Production
- Flexibility.
Question 15.
Write two flaws of capitalist economy.
Answer:
- Unequal distribution of income and wealth
- Class struggle.
Question 16.
Consumer’s sovereignity is the speciality of which economy?
Answer:
Capitalist economy.
Question 17.
Unemployment and social insecurity is the defect of which economy?
Answer:
Capitalist economy.
Question 18.
What is the meaning of, socialist economy?
Answer:
The economy in which the government has control or ownership of the major resources of production, is called socialist economy.
Question 19.
Central planning is the speciality of which economy?
Answer:
Socialist economy.
Question 20.
Balanced development is the property of which economy?
Answer:
Socialist economy.
Question 21.
The end of the consumer’s sovereignty is the defect of which economy?
Answer:
Socialist economy.
Question 22.
What is the meaning of mixed economy?
Answer:
An economy in which the private and public sectors co-exist and work together.
Question 23.
Individual motivation and social welfare are possible in which economy?
Answer:
In mixed economy.
Question 24.
Which economy is capable of efficient sharing of resources?
Answer:
Mixed economy.
Question 25.
Unskilled, employment is the defect of which economy?
Answer:
Mixed economy.
Question 26.
Based on the level of development, name the types of economy.
Answer:
- Developing economy
- Developed economy.
Question 27.
Which sector in a developed economy has the highest contribution in national income?
Answer:
Service sector.
Question 28.
Define the economic system as given by Professor A.J. Brown.
Answer:
According to Prof. A.J. Brown, “An economy is defined generally as a system by which people get a living.”
Question 29.
Nature of economic system depends on whom?
Answer:
The nature of economic system depends to a larger extent on the amount, nature and extent of interference by the state, and the social traditions of the economy.
Question 30.
What is the meaning of consumption?
Answer:
The satisfaction of the needs of the individual and group is obtained through the use of goods and services. This is called consumption.
Question 31.
Describe the two characteristics of economy.
Answer:
- The basis of economy is the individual or group.
- Investment is necessary for the economy.
Question 32.
Define capitalism in the words of Fergusen and Cripps.
Answer:
“Capitalism is that system in which there is private property and the economic decisions are taken in private form.”
Question 33.
Outline any three characteristics of the capitalist economy.
Answer:
- The right to own personal property
- Economic independence
- Objective of earning private profit.
Question 34.
Define socialism as given by Professor Leftwich.
Answer:
The main role of the government in socialism is that of central role. It owns the resource of production and directs economic actions.
Question 35.
Explain the three characteristics of socialist economy.
Answer:
- Government ownership
- Centralized planning
- Lack of exploitation
Question 36.
Explain the three qualities or benefits of socialist economy.
Answer:
- Optimum utilization of economic resources
- Freedom from business cycle
- Rapid economic development
Question 37.
Which economists have criticized the socialist economy?
Answer:
Robbins, Dickins, Geoge Holme, Morris Dove, etc.
Question 38.
Explain three flaws of socialist economy.
Answer:
Following are the flaws of socialist economy
- Faulty distribution of means of production
- Elimination of sovereignty of the consumer
- Bureaucracy.
Question 39.
Define the mixed economy as given by Professor Samsuelson.
Answer:
“Mixed economy is that economy in which both government and private individuals exercise economic control.”
Question 40.
Mention three features of mixed economy.
Answer:
- Co-existence of private and public sectors
- Controlled economy
- Economic planning.
Question 41.
Write four benefits of mixed economy.
Answer:
- Adequate security
- Removal of economic disparity
- Economic equality
- Protection from exploitation.
Question 42.
Write four defects of mixed economy.
Answer:
- Corruption
- Black Money
- Threat to democracy
- Unstable Economy.
Question 43.
When did the mixed economy begin in India?
Answer:
The introduction of a mixed economy in India can be traced to the industrial policy of 1948 or industrial policy created after the first five-year plan.
Question 44.
Describe any three characteristics of developed economy.
Answer:
- Higher national per capita income
- High rate of capital formation
- Advanced technology.
Question 45.
What do you mean by under-developed or developing economies?
Answer:
“An under-developed or developing economy is that in which per capita actual income is less than the present per capita income of developed economies like Canada, United States of America, Great Britain or Western European Countries.”
Question 46.
Write three characteristics of a developing economy.
Answer:
- Low living standard
- Higher dependence on agriculture
- Lower levels of labour productivity
Question 47.
When and into how many parts has the World Bank divided the world economy?
Answer:
In 2003, World Bank has divided the world economy into four parts, based on the national income and per capita income of different countries of the world in 2003.
Question 48.
Write the names of the categories in which the World Bank has categorised the world economy.
Answer:
Low income countries, countries with lower middle income, countries with upper middle income countries high income countries, and very high income countries.
RBSE Class 11 Economics Chapter 3 Short Answer Type Questions
Question 1.
Explain the economic system.
Answer:
The economic system or economy means the scientific and institutional structure, under which the entire economic activities are conducted. Under an economy, a person earns his livelihood and under the economic system, the methods, rules and institutions are included, through which the economy is operated.
Question 2.
Why is the state’s moderate intervention observed on humanitarian activities in all the countries?
Answer:
At present, economists have laid more emphasis on the aspect of economic growth or economic development. Hence the moderate intervention of the state on humanitarian, activities is seen in all the nations, and due to this, the nature of the economy or economic system. Largely depends on the degree of state intervention, its nature, extent and social traditions.
Question 3.
The basis of the economic system is an individual or group, how?
Answer:
The concept of the economy is related to the economic activities of the people of a particular private sector, that become part of the production process to earn livelihood and satisfy their needs, i.e. the economy is man-made and it performs a study of economic activities.
Question 4.
Explain the mandatory processes of the economic system.
Answer:
Following are the mandatory processes of the economic system:
- Production :
The production of goods and services depends upon requirement, capability, techniques of production and amount of resources available. - Consumption :
The requirements of a group of people are fulfilled by the use of goods and services. - Investment :
Investment refers to the net increase in amount of capital (stock) in the present year as compared to the previous year.
Question 5.
Why is exchange necessary for economy?
Answer:
The ultimate goal of production is to satisfy consumer needs. Freedom of choice has to be provided to the consumers in all the economies and arrangement of exchange system has be done for this, for example, at food shops, consumer shops, etc.
Question 6.
Different forms of economy are visible, why?
Answer:
At present various forms of an economy are visible due to varied levels of interference of the state on economic activities of humans its, nature and, extent, social laws, customs and traditions and due to difference in the structure of economic organizations.
Question 7.
Explain the four characteristics of the capitalist economy.
Answer:
Following are the major characteristics of the capitalist economy :
- Right to own private property :
In a capitalist economy, every person has complete right to own private property and use it as per his discretion. After death, private property can also be handed over to successors. - Economic Freedom :
In capitalism, every person has the right to use his property as per his discretion and to select his field of enterprise. - Consumer’s sovereignty :
Sovereignty of the consumer has an important place in this economy. The consumer has the freedom of consumption as per his liking and preference. - Objective of earning personal profit :
Earning personal profit is the major objective in a capitalist economy and no work is done without the motive of earning profits. - Competition :
In capitalism, competition exists between the buyers and sellers in goods markets and resources markets. - Price mechanism :
In capitalist economy, all the economic activities are conducted coordinated and controlled by pricing mechanism and not by any centralized power.
Question 8.
Explain the four merits of the capitalist economy.
Answer:
Following are the merits of capitalist economy
- Efficient Production :
Due to the motive of earning maximum profits and existence of absolute competition in the market, every entrepreneur tries to produce a better and more durable item as compared to another entrepreneur and uses ever-new techniques for this purpose. He also tries to minimise the the cost of production in order to maximise his profit. - Flexibility :
Flexibility is an important characteristic of this type of economy. It has the capability of moulding itself in any way according to the need of time. - Development of the individual :
Every individual makes efforts to increase his qualification and ability in this competitive market because success is attained by the best person in trade. - Automated :
Price mechanism plays an important role in the working of this economy. There is no external interference in this economy.
Question 9.
Explain the two flaws of the capitalist economy.
Answer:
Following are the two flaws of the capitalist economy
- Unequal distribution of income and wealth :
Inequality in income and wealth is found in this type of economy. This inequality emerges due to private property, free competition, desire to earn maximum profits, etc. Rich people become richer and poor people become poorer. - Class struggle :
Due to inequality of income and wealth, the society gets divided into two classes – rich class and poor class. The rich class leads a luxurious life while the poor class (labour class) remains unable even to arrange food two times a day. This situation gives rise to class conflict in the future.
Question 10.
Explain unearned income and social parasitism.
Answer:
Due to private ownership and succession on property in a capitalist economy, some people are able to obtain income without labour. The landlords obtain revenue, capitalists obtain interest and rent, etc. Through this they sustain themselves on others’ income, generation after generation.
Question 11.
What is the modern form of capitalist economy?
Answer:
In modem capitalism, elements such as inconsistencies in the market, preference to modem laws and consolidation, increasing influence of labour organizations, increase in public enterprises, moderate control of the state, etc. have emerged in new form, but still, even today, characteristics of pure capitalism are present in modem capitalism. However, now the governments are not remaining passive and they have started to perform their active role as social welfare agent in capitalist economy.
Question 12.
Describe Joad’s ideas about socialism.
Answer:
In context to socialism, “Joad has written that, “Socialism is like a hat that has lost its shape because everybody wears it”. This means that socialism is multilateral in nature. Government interference is omnipotent in socialism. The state controls the economy in an influential way and conducts it.
Question 13.
Explain the two characteristics of socialism or planned economy.
Answer:
Following are the two characteristics of socialism or planned economy :
- Government ownership :
In a socialist economy, ownership of government exists on the major resources of production. All the resources of private property and production are nationalized and brought under government ownership. The resources are used in a planned manner for the motive of providing maximum welfare. Every citizen works while remaining under the influence of the government. - Centralized planning :
There is concrete arrangement of centralized planning in a socialist economy. The economy is operated through centralized planning and for the fulfillment of fixed objectives. All the decisions associated with production and distribution are taken through centralized planning.
Question 14.
Write three points in favour of the socialist economy.
Answer:
Following are three important points favouring the socialist economy:-
- Optimum use of economic resources :
In socialist economy, all the natural and human resources are used by centralized planning. In socialist economy, the objective of centralized planning is maximizing social welfare and social security. - Freedom from trade cycles :
Socialist economy is a planned economy, therefore ups and downs are less in this economy as compared to free-market economy. The government uses the resources in a planned way, while keeping in mind the objective of social security and maximum welfare. Therefore, there is less possibility of upsurge or slump in economy.
Question 15.
Explain the flaws of the socialist economy.
Answer:
Following are the flaws of the socialist economy :
- Lack of personal motivation :
Personal benefit and right of owning private property are such elements which motivate an individual to work harder. Both these elements are absent in socialist economy. Nowadays, new experiments are being conducted in socialist economy to overcome this drawback. - Lack of productivity and skillfulness :
In capitalist economy, the major objective of the producer is accruing maximum profits. Therefore, he makes efforts to maximize production at minimum costs, but in socialist economy, neither the sources are distributed for maximizing profit, nor the motivation of personal benefit exists, due to which, lack of productivity and skillfulness is found here.
Question 16.
According to Schumpeter, how is the socialist economy superior to the capitalist economy?
Answer:
According to Schumpeter, “Socialist economy is better than capitalist economy because in socialist economy, efficient production and more sensible use of resources is made under government supervision. Trade cycles are absent here. Monopolistic tendencies are eliminated, economic disparities are reduced, and unemployment and exploitation comes to an end.”
Question 17.
Explain the two characteristics of mixed economy.
Answer:
Following are the two characteristics of mixed economy
- Coexistence of public and private sectors :
The most important characteristic of this economy is that both public and private sectors coexist in this. Both the sectors work together. - Private property and economic equality :
On one hand, an individual has the freedom to accumulate and own private property, while, on the other hand, the government also forms strict policies to maintain equality in distribution of income and wealth.
Question 18.
Explain the benefits of a mixed economy.
Answer:
Following are the benefits of a mixed economy :
- Adequate security :
In mixed economy, an individual enjoys adequate security in economic sphere-an individual can spend his income freely, and can choose any occupation according to his interest and qualification. Freedom of obtaining personal benefit and owning property exists to a certain limit. - Decline in economic disparity :
Economic disparity is a curse for any economy. The government imposes progressive taxes to decrease economic disparity in mixed economy. It makes efforts to check monopolistic tendencies, so that economic equality may be established in the economy.
Question 19.
Explain any of three characteristics of the developed economy.
Answer:
Following are the major characteristics of developed economy :
- High national and per capita income :
In developed countries, the level of per capita income and national income is very high and the standard of living of the residents here is very high. - High rate of capital formation :
With the viewpoint of increasing the level of production, the economists have always accepted the importance of capital formation. When a large part of national income is saved and reinvested, it is known as capital formation. - Importance of industries and non-agricultural occupations :
A large part of population in developed economies is engaged in non-agricultural occupations such as industries, transportation, communication, banking, insurance, etc. and the contribution of the service sector is more in national income.
RBSE Class 11 Economics Chapter 3 Long Answer Type Questions
Question 1.
What is the meaning of a developing or underdeveloped economy? Write its features.
Answer:
According to Professor Samuelson, “An underdeveloped or developing economy is that in which per capita actual income is less than the present per capita income of Canada, America, Great Britain or Western European countries”. In the first five-year plan, the Planning Commission has given a definition “Underdeveloped country is one which is characterized by the co-existence, in greater or lesser degree, of unutilized or under-utilized manpower on the one hand and of the unexploited natural resources on the other”. Economies of India, Bangladesh, Pakistan, etc. are called underdeveloped economies.
Following are the basic characteristics of developing economies :
- Low level of national income and per capita income :
In developing nations, the level of national income and per capita income is lower as compared to developed economies. - Low standard of living :
Due to lower level of per capita income of people in underdeveloped or developing countries, their standard of living is also very low, due to which their work efficiency also becomes less. The consumption level of necessary things such as food, clothing, housing, etc. also remains on the lower side. - Excessive dependence on agriculture :
In underdeveloped countries, about 30 to 70 percent population depends on agriculture. Even after dependence on agriculture, low level of agricultural development also is another characteristic of developing economies, due to which the contribution of agricultural sector in per capita income declines and the income which is derived from agricultural sector remains low in ratio of the population engaged in this occupation. - Industrial backwardness :
Industrial structure of underdeveloped or developing countries is usually backward and imbalanced and the development of basic and heavy industries such as iron ore, heavy engineering, machinery equipment, heavy chemicals, transportation, etc. is also comparatively less. Due to this, people get less employment in this sector and the contribution of this sector in gross domestic product is less. - Low level of labour productivity :
The level of labour productivity is low in developing countries. This is both a cause and consequences of low standard of living of an individual. Due to less productivity, the level of income is also low and this gives rise to poverty. Low level of labour productivity is caused by poor health of the workers, undeveloped skills, less motivation to work, institutional structure, etc. - Widespread poverty :
The vicious circle of poverty goes on in the less developed countries. Due to the lower level of income per person and due to the income inequality, widespread poverty is prevalent. - Obsolete technique :
Level of research and development is low in developing economies. Due to lack of resources, lack of capital and high labour availability in these economies, use of modern technology is also affected negatively. This results into a negative impact on productivity and level of quality of production. - Unemployment and disguised unemployment :
Level of unemployment is very high in developing countries. In rural and urban areas, involuntary unemployment is largely found while disguised unemployment is found in agricultural sector.
Other characteristics :
- Level of human welfare is low in underdeveloped countries. Their achievements regarding expected actual income, health and education are also low.
- Inequality in distribution of income and wealth is found in underdeveloped or developing economies. In developing countries, less attention is paid on taxation system, social security system, educational training, employment, etc. as compared to developed countries.
Question 2.
What is the meaning of developed economy? Describe its features.
Answer:
Developed Economy :
Developed economy is that economy in which there is rapid economic development. Level of per capita income and national income is very high in it. Economies of United States of America, Canada, France, Germany, Japan, etc. are kept in the category of developed economy. Following are the major characteristics of developed economy
- High national and per capita income :
In developed countries, the level of per capita income and national income is very high and the standard of living of the residents here is very high. According to the 2012 report of World Bank, annual per capita gross domestic product of developed capitalist countries was at an average of 38,745 dollars in the year 2010. - High rate of capital formation :
With a view to increase the level of production, the economists have always accepted the importance of capital formation. When a large part of national income is saved and reinvested, it is known as capital formation. Rate of capital formation is high in developed nations and the vicious circle of poverty is not present there - Importance of industries and non-agricultural occupations :
A large part of population in developed economies is engaged in non-agricultural occupations such as industries, transportation, communication, banking, insurance, etc. and the contribution of the service sector is more in national income. - Developed with technological point of view :
Developed economies are capable economies from technological point of view. A large part of national income in these economies is invested in research and technology development. Techniques of production are continuously developed to increase productivity. - Other characteristics :
Apart from the above mentioned features, developed economies also possess the following characteristics- In developed countries, human resource management and use is done in an appropriate manner.
- The awareness to provide momentum to the process of economic development is comparatively more in developed countries.
Question 3.
Explain the characteristics of socialism for planned economy.
Answer:
Following are the characteristics of socialism or planned economy :
- Government Ownership :
In a socialist economy, ownership of government exists on all the major resources of production. All the resources of private property and production are nationalized and brought under government ownership. The resources are used in a planned manner for the motive of maximizing total welfare. Every citizen works while remaining under the influence of the government. - Centralized planning :
There is concrete arrangement of centralized planning in a socialist economy. The economy is run through centralized planning for the fulfillment of fixed objectives. - Objective of maximizing social welfare :
In socialist economy, the objective of the government is performing maximum social welfare. Personal profit is not important here. - Lack of exploitation :
In socialist economy, exploitation of person is not done because the-government itself runs the economy and its ultimate objective is maximum social welfare. - Equality :
In socialist economy, the entire property of the state is owned by the government. Private property does not exist and the objective of earning maximum profits is also not there, so there is no exploitation and equality is established. - Full employment :
A major characteristic of socialist economy is that full employment is found in this economy. Due to efforts made for optimum arid best use of human resources, unemployment is not even visible here. Full employment exists in the economy. - Concrete objectives :
Socialist economy works with certain objectives. Objectives of the economy are fixed. The society as a Whole or the government decides these objectives and planned efforts are made to achieve them. Rapid industrialization, increase in standard of living, establishment of full employment, narrowing the inequality of wealth and income, etc. are some of the major objectives of socialist economy. - Lack of competition :
As the government is the major entrepreneur and there is centralized control in socialist economy, lack of competition is found here. Instead of cutthroat competition, government monopoly is visible here. - Development of heavy and infrastructural industries :
Due to complete control and planning in socialist economy, heavy industries and infrastructural industries undergo rapid development. - Social Security :
Due to government control in socialist economy, every individual gets social security from hunger, illness, accident, etc. The objective of socialism is maximum social welfare.