ECONOMICS QUESTIONS

CLASA 10TH.

1 . Define the term National

Income?
Answer:
National income is defined as
the total value of all final goods
and services produced with a
country plus net income from
transactions like (export and
import) with other countries.

2. Why is the total income of

countries not used to make
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comparisons between them?
(2012)
Answer:
The total income of countries is
not used to make comparisons
between them, because the
population of different countries
is different and does not give a
clear picture if comparisons are
made on this basis.

3. What is the advantage of

per capita income? Mention
any one. (2014)
Answer:
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It helps to compare the
development of countries as per
capita income tells us whether
people in one country are better
off than others in a different
country.

4. What do final goods and

services mean? (2014)
Answer:
The various production activities
in the primary, secondary and
tertiary sector produce large
number of goods and services
for consumption and investment
are final goods and services.
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5. Why is per capita income of
different countries calculated
in dollars and not in their own
currencies by the World
Bank? (Cbse 2012)
Answer:
Per capita income of different
countries is calculated in dollars
and not in their own currencies
because the dollar has been the
strongest and stablest currency
since the end of the 2nd World
War and it becomes easy to
compare the per capita incomes
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of various countries when these
are converted into a common
currency, i.e., US dollar ($).

6. What may be development

for one may not be
development for the other.”
Explain with a suitable
example. (Cbse 2011)
Answer:
Different persons have different
notions of development because
life situations of persons are
different. For example,
Construction of dams leads to
generation of hydroelectricity,
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thus development. However
many people have to be
displaced from their villages,
hence it may not be
development for them.

7. Why do we use averages?

Are there any limitations to
their use? Illustrate with your
own examples related to
development. (Cbse 2010
Question)
Answer:

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Total income is not a useful
measure for comparison
between countries. Since
countries have different
populations, comparing total
income does not tell what an
average person is likely to earn.
Hence, we use average income
which is total income of the
country divided by total
population.
The defect of average as a
measure is that it does not show
the distribution (dispersion) of
income between the rich and
the poor.
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Two countries may have the
same average income but in
one country almost every family
may enjoy more or less the
same kind of income, whereas
in the other, some may be very
rich and others very poor. The
disparity between rich and poor
is an important feature that the
average measure (per capita
income) does not consider.
Example: In terms of
development, we can take the
example of India, where the
metro towns are full of high-rise
buildings and shopping malls
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while some villages have not yet
been provided with a basic
necessity like electricity.

8. What is per capita income?

Mention any two limitations of
per capita income as an
indicator of development.
(2012)
Answer:
The total income of a country
divided by its total population
gives the Per Capita Income.
Money cannot buy all the goods
and services that are needed to
live well. So income by itself is
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not a completely adequate
indicator of material goods and
services that citizens are able to
use. For example, money can
not buy a pollution-free
environment or ensure that one
gets unadulterated medicines,
unless one can afford to shift to
a community that already has all
these things.

9. On the basis of which three

indicators of HDI 2004 Sri
Lanka has better rank than
India? (2014)
Answer:
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Three indicators of HDI 2004 in
which Sri Lanka has better rank
than India:

Per capita income—The per

capita income of Sri Lanka in
US dollars was 4,390 US dollars
while that of India was 3,139 US
dollars.
Life expectancy at birth—The
life expectancy at birth for Sri
Lanka was 74, higher than that
of India at 64.
Gross enrolment ratio for three
levels—Sri Lanka had Gross

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Enrolment ratio of 69 while that
of India was 60.

10. 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.

11. Suggest any one way to

create employment

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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.

12. Why is NREGA also called

the Right to work? Explain the
objectives of National Rural
Employment Guarantee Act
2005. (2015, 2014, 2013)
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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.

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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.

13. What are final goods and

intermediate goods? How do
they help in calculating (GDP)
Gross Domestic Product?
(2013)
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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

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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

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14. 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.

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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.
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.
While production in the service
sector rose by 11 times,
employment in the service
sector rose less than three
times.

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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.

15. 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:

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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.).

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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.

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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.
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16. 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
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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.

17. Describe the importance

of Primary sector in the Indian
economy.
Answer:
Importance of Primary sector:

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Primary Sector provides the
basic needs of economy for
food and mineral ores.
It produces some of the raw
materials (like jute, cotton, coal
extracted from mines) for the
industrial sector.
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.
The agricultural population in
the Primary sector provides a
very large market of consumers
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for the Secondary sector (for
buying finished products like
clothes, goods of daily need,
fertilizers, etc.).

18. How can we create more

employment in secondary and
tertiary sectors in rural India?
(2012)
Answer: 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

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reducing the problem like
transport or trade.
Providing credit at a reasonable
rate of interest to help farmers
buy seeds, fertilisers,
agricultural equipments,
pumpsets etc. can generate
employment in rural banking.
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
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people can be employed in the
same field.
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.

19. Explain the importance of

the service sector. (2013)

Answer:
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Tertiary sector or service sector
plays a very significant role and
its importance is rising day by
day:

Greater the development of

primary sector and secondary
sector more would be the
demand for Services.
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
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administrative offices, transport,
banks, insurance companies,
etc. are required.
Even development of agriculture
and industry leads to the
development of services such
as transport, trade and storage,
etc.
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.

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

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.

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

21. 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
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fails to repay the loan, the
lender has the right to sell the
asset or collateral.

22. 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
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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.

23. 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
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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.

24. What is the meaning of

‘investment’? (2015 D)
Answer:
Investment is buying of an asset
in the form of a factory, a
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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.

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25. 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.

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26. 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:

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A demand deposit has the
essential characteristic of
money. It can be used as a
medium of exchange.
The facility of cheques against
demand deposits makes it
possible to make payments,
without using cash.
Since demand deposits are
accepted widely as a means of
payment along with currency,
they constitute money in the
modem economy.

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27.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
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belong to the poorest section of
society. This idea is the brain
child of Prof. Mohammad
Yunus, recipient of 2006 Nobel
Prize for Peace.

28. 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
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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.

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29.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
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lending as a security against
their own funds.

30. Explain the role of

government to make
globalization fair. (2011 D)
Answer:
The government can play a
major role in making fair
globalization possible:
Fair globalization would create
opportunities for all, and also
ensure that the benefits of
globalization are shared better.
Government policies must
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protect the interests not only of
the rich and the powerful, but
also of all the people in the
country.

Government should ensure that

labour laws are implemented
and workers’ rights are
protected.
Government should support
small producers to improve their
performance till the time they
become strong enough to
compete with foreign
competition.

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If necessary, government should
use trade and investment
barriers.
It can negotiate with WTO for
fairer rules.
It can also align with other
developing countries with similar
interests to fight against the
domination of developed
countries in the WTO.

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