24 Questions
What is the primary function of Public Sector Undertakings (PSUs) in a mixed economy?
Production and distribution of goods and services
Which sector does an individual, like Mukesh Ambani, belong to?
Household sector
What is the primary characteristic of a command economy?
Government ownership of the means of production
What is the primary function of the private sector in a mixed economy?
Production of goods and services
Which sector includes exports and imports of goods and services?
External sector
What is the characteristic of a market economy?
Private ownership of the means of production
What is the relationship between a person and a company in the context of the household sector?
A person belongs to the household sector, and the company belongs to another sector
What is the primary function of the government sector in a mixed economy?
Provision of infrastructure and healthcare services
In a command economy, who decides how the output of the society is to be divided among different people?
The government
What is the primary characteristic of a mixed economy?
Coexistence of market and command elements
In a market economy, who answers the major economic questions of what, how, and for whom?
Private individuals and firms
What is the primary role of the government in a mixed economy?
Regulation of economic life
What sector of the economy includes public administration, police, and defence?
Government Sector
What is the primary characteristic of a command economy?
Government ownership of resources
What is the primary function of the private sector in a mixed economy?
Ownership and operation of enterprises
What type of economy operates at the opposite end of the spectrum from a command economy?
Market Economy
What is the outcome when the household sector saves Rs. 30 in the economy?
Rs. 30 capital goods are produced
In the given scenario, what is the relationship between savings and investment?
Savings are equal to investment
What type of goods are produced by the enterprises in the private sector?
Capital goods
What is the outcome when an economy wants to produce more goods and services?
It should increase its savings
What is the role of the household sector in the economy?
Saves and deposits money in banks
What is the outcome when the private sector borrows Rs. 30 from banks?
The production of capital goods increases
What is the characteristic of an economy that wants to grow?
It increases its savings
What happens when an economy saves more?
The production of capital goods increases
Study Notes
Four Sectors of Economy
- A mixed economy is divided into four sectors: private sector, government sector, household sector, and external sector.
Government Sector
- The government sector includes public administration, police, defense, framing of laws, and enforcing them.
- It also undertakes production activities through its companies, such as Coal India Ltd. (CIL) and National Thermal Power Corporation (NTPC).
- All companies owned by the Central or State Governments are considered Public Sector Undertakings (PSUs) and belong to the government sector.
Household Sector
- A household consists of a group of persons who normally live together and take food from a common kitchen.
- The size of a household is the total number of persons in the household.
- Households consist of people who work in firms as workers, earn wages, and are also owners of firms and earn profits.
- All human beings (population) belong to the household sector.
Private Sector
- The private sector includes all firms or enterprises owned by private individuals or entrepreneurs.
- The basic function of private sector is the production of output, i.e., goods and services.
- In a command economy, the government owns most of the means of production, but in a mixed economy, most decisions are made in the market place.
External Sector
- The external sector consists of the exports and imports of goods and services flowing into the country or out of the country.
- It also includes the financial flows from and into the domestic country.
Savings and Investment
- If the household sector saves more, the enterprises will produce more capital goods.
- Savings are equal to the production of capital goods in the economy (when there is no government and external sector).
- Higher savings lead to higher production of capital goods, which in turn propels the economy on a higher growth path.
- Savings are equal to investment, and higher savings lead to higher investment.
This quiz covers the roles of the government sector in the economy, including production activities through public sector undertakings, and the definition of the household sector.
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