Students can download Class 8 Economics Chapter 2 Meaning and types of Economics Important Questions, KSEEB Class 8 Social Science Important Questions and Answers helps you to revise the complete Karnataka State Board Syllabus and to clear all their doubts, score well in final exams.
Karnataka State Syllabus Class 8 Social Science Economics Important Questions Chapter 2 Meaning and types of Economics
Question 1.
What is an economy?
Answer:
Economy refers to the nature of organisation of economic activities in a society.
OR
An economy is a framework of economic institutions where all economic activities are carried out to promote individual and social welfare.
Question 2.
What are the different bases on which economies are classified?
Answer:
- Based on the level of development, economies are classified as developed or rich economies and underdeveloped/developing or poor economies.
- Based on the ownership of resources, economies are classified as private ownership and collective ownership.
- Based on the administrative divisions, economies are classified as village economy, district economy, state economy and national economy.
- Based on the ownership of the means of production and extent of government regulation of economic activities, economies are classified into capitalist economy, socialist economy and mixed economy.
Question 3.
What are the features of an economy?
Answer:
The features of an economy are as follows:
- An economy consists of individuals, economic institutions and government, and their interactions.
- An economy is a dynamic entity. It is changing continuously.
- Production, consumption and investment are the crucial activities in an economy.
- The type of economic activity varies depending on the type of economy.
- Economic activities in an economy are regulated by institutions set up by the government or international organisations,
Question 4.
Expand the following abbreviations: RBI, SEBI, IMF, WTO, SAARC, ADB.
Answer:
- RBI – Reserve Bank of India
- SEBI – Securities and Exchange Board of India
- IMF – International Monetary Fund
- WTO – World Trade Organisation
- SAARC – South Asian Association for Regional Co-operation
- ADB – Asian Development Bank.
Question 5.
How are economic systems classified on the basis of ownership of means of production and extent of government regulation?
Answer:
Based on the ownership of the means of production and extent of government intervention and regulation of economic activities, economic systems are classified into capitalist economy, socialist economy and mixed economy.
Question 6.
What is a capitalist economy?
Answer:
A capitalist economy is one in which the means of production are owned by individuals and they are free to use them in the way that benefits them, Hence it is also called a free enterprise economy. Government intervention in economic activities is minimal.
Question 7.
Explain the features of a capitalist economy.
Answer:
The features of a capitalist economy are:
- Private property: An individual is free to own, acquire and bequeath property according to his or her wish. Since the property is used for one’s own benefit, the incentive to acquire and accumulate wealth is very strong.
- Freedom of enterprise: In a capitalist economy business firms are free to acquire resources, use them in the production of goods and services as also sell them in the markets of their choice and earn maximum profits.
- Consumer’s sovereignty: Consumer is king in a capitalist economy. Consumers are free to spend their income on goods and services that give them maximum satisfaction. Production is guided by consumer’s choices.
- Profit motive: Since there are no restrictions on acquisition and accumulation of wealth, producers or the capitalist class are motivated to maximise their profits.
- Competition, markets and prices: Since everybody is free to pursue any activity of their choice for earning profits, there is intense competition in a capitalist system. The market forces of demand and supply operate freely to determine the price.
- Absence of government intervention: Government intervention is minimum or does not exist in the operation of the markets, determination of prices and in the decisions of economic agents.
Question 8.
What are the defects of capitalist system?
Answer:
The defects of capitalist system are:
- Focus on profit and accumulation of wealth lead to social and economic inequality.
- Since business firms are free to acquire resources and use them in producing goods of their choice, there could be misallocation, under-utilisation or over-utilisation of resources.
- Profit being the primary motive, social welfare is not taken into consideration.
Question 9.
What is planning?
Answer:
Planning implies deliberate control and direction of the economy by a central authority for the purpose of achieving definite targets and objectives within a specified period of time.
Question 10.
What is a socialist economy?
Answer:
A socialist economy is one in which the resources of production are owned and controlled by the government to promote the overall interests of the society. In this system a central planning agency plans and regulates all the economic activities.
Question 11.
Explain the features of a socialist economy.
Answer:
The features of a socialist economy are:
- Collective ownership of means of production and wealth: In a socialist economy the means of production are owned by the government.
- Social welfare objective: Keeping in view the welfare of the people, the government decides the type and levels of output and distribution of the same.
- Central planning: Identification of national priorities and allocation of resources to meet them is done through a Central Planning Authority. All decisions regarding production, consumption and investment are made by the government keeping in mind the present and future needs. Markets and prices have hardly any role in a socialist economy.
- Reduction in inequalities: Due to non-existence of private property and accumulation of wealth, there is reduction in economic inequality.
- No class conflict: Since there is only the working class in a socialist economy, all being co-workers, there is no class conflict.
Question 12.
What is a mixed economy?
Answer:
A mixed economy is an economic system in which public and private sectors coexist. It is a combination of both free enterprise or capitalist economy and a government controlled socialist economy.
Question 13.
Explain the features of a mixed economy.The features of a mixed economy are:
Answer:
1. Coexistence of public and private sectors:
In a mixed economy, private enterprises that work with profit motive coexist with government enterprises that work with welfare objective. The economic activities are generally demarcated.
2. Individual freedom:
While individuals are free to choose what they want to consume, producers are not given the freedom to exploit the consumers. Government lays down rules and regulations keeping in mind the welfare of the people. But the private sector enjoys complete freedom within the rules, regulations and restrictions of the government.
3. Economic planning:
The government uses the planning mechanism to prepare development plans. While the public sector is under the direct control of the government and works as per production targets and plans formulated, the private sector is supported through incentives and subsidies to adhere to national priorities.
4. Price mechanism:
Prices are significantly influenced by government policies. There are administered prices for public sector units.
Question 14.
How does the government regulate the activities of the private’sector in a mixed economy?
Answer:
The government regulates the activities of the private sector through various policies such as licensing policy, taxation policy, price policy, monetary policy and fiscal policy.
Question 15.
How are economies classified on the basis of level of development?
OR
Distinguish between developed and developing economies.
Answer:
On the basis of level of development, economies can be classified into developed economies and developing economies.
1. Developed economies:
Developed countries have high national and per capita income, high savings and investment and therefore high rate of capital formation. They have highly trained human resources, better civic facilities, good health and sanitation facilities, low birth rate, low death rate and low infant mortality. They possess well developed industrial and social infrastructure including strong financial and capital markets. Standard of living is generally high.
2. Developing economies:
Developing economies are also referred to as underdeveloped, backward or poor countries. The national and per capita income in these countries is low. They have backward agricultural and industrial sectors with low savings, low investment and low capital formation. They have low standard of living, poor health and sanitation, high infant mortality, high birth and death rates, and poor infrastructure
Question 16.
Why is India considered a developing economy?
Answer:
In India the national and per capita income is low. The agricultural and industrial sectors are backward with low savings, low investment and low capital formation. The standard of living is low, health and sanitation are poor, infant mortality is high, birth and death rates are also high, and infrastructure is poor. Since India exhibits all the characteristics of an underdeveloped country but is on the path of development, it is considered a developing economy.
Question 17.
Why is India considered a mixed economy?
OR
What are the features of the mixed economic system in India?
Answer:
India is a classic example of a mixed economy with both the public and private sectors operating within the regulatory framework of the government. The main features of the mixed economic system in India are:
1. Coexistence of public and private sectors:
The Industrial Policies of 1948. and 1956 formulated by the Indian government provided for the coexistence of public and private sectors, with a larger role for the public sector.
2. Planned development:
The Planning Commission was set up in 1950 to prepare plans for the all round development of the country. Five Year Plans were adopted to achieve economic growth, self-reliance, eliminate poverty and provide basic necessities like food, clothing, shelter, education, health, etc.
3. Role of public sector:
The public sector has played an important role in the development of the Indian economy. It has increased the pace of economic growth and reduced disparities of income and wealth. It has contributed to the development of infrastructure, establishment of basic and heavy industries, development of backward regions and promoted international trade.
4. Private sector:
The private sector has also played a prominent role in development. It provides employment to three-fourths of our manpower. Many policies and laws have been enacted to control the private sector.
5. Coordination between public and private sectors:
Both the public and private sectors have worked together for achieving the goals set by the Planning Commission.
Question 18.
What were the objectives for promoting the public sector in India?
Answer:
Achievement of rapid economic development, reduction in concentration of economic power, balanced regional development, employment generation, import substitution and export promotion, and resource mobilisation were the main objectives for promoting the public sector in India.
Question 19.
Discuss the performance of public sector in India.
Answer:
The public sector has made significant contribution to the country’s economy by filling the gaps in the industrial sector, generating employment and achieving balanced regional development. The growth profile of the public sector has been impressive.
It has a good hold over the commanding heights of the economy in terms Of investment in key sectors like steel, electricity generation and petroleum. But the sector is lagging in financial performance or profitability.
Question 20.
What are the problems faced by the public sector in India?
Answer:
The public sector in India is faced with many problems that have affected its performance. Some of the problems are: defective pricing policy, excessive political interference, delays in decision-making, over-staffing, lack of accountability and under-utilisation of capacity.
Question 21.
What is disinvestment?
Answer:
Literally, disinvestment means selling of assets. In the case of public sector units, disinvestment means Government selling its shares/diluting its stake in such units in which it has a majority holding.
Multiple Choice Questions
Question 1.
Consumer sovereignty is a feature of
(A) socialist economy
(B) capitalist economy
(C) mixed economy
(D) poor economies.
Answer:
(B) capitalist economy
Question 2.
In a capitalist economy, the market forces of demand and supply operate freely to determine the
(A) government policy
(B) production
(C) profits
(D) price.
Answer:
(D) price.
Question 3.
Collective ownership of means of production is found in a
(A) socialist economy
(B) capitalist economy
C) mixed economy
(D) developing economy.
Answer:
(A) socialist economy
Question 4.
In a socialist economy, non-existence of private property reduces
(A) class conflict
(B) consumer sovereignty
(C) economic inequality
(D) social welfare.
Answer:
(C) economic inequality
Question 5.
A classic example of a mixed economy is
(A) India
(B) U.S.A.
(C) Russia
(D) China.
Answer:
(A) India
Question 6.
Economies are classified as developed economies and developing economies based on the level of
(A) ownership of means of production
(B) development
(C) economic activities
(D) ownership of resources.
Answer:
(B) development
Fill In The Blanks
- Economy refers to the nature of organisation of economic activities
- NITI Aayog was set up in 2015
- Free enterprise is a basic feature of capitalist economy.
- A good example of capitalist economy is U.S.A.
- Coexistence of public and private sectors is seen in mixed economy
- Consumer is king in a capitalist economy.
- In a socialist economy the productive resources are owned and controlled by the government
- Market and prices have little role to play in socialist economies.