STD 9 Social Science II: Chapter 09 Economic Systems and Economic Policies - Questions and Answers

Study Notes Solution for Class 9 Social Science II സമ്പദ്‌വ്യവസ്ഥകളും സാമ്പത്തിക നയങ്ങളും | Text Books Solution Geography (English Medium) Geography: Chapter 09 Economic Systems and Economic Policies

Social Science II Chapter 9: Economic Systems and Economic Policies

1. On the basis of ownership, economic systems are classified into three. Which are they?
1. Capitalist Economy
2. Socialist Economy
3. Mixed Economy

2. What do you meant by a Capitalist economy?
• Capitalist economy is the economy in which the ownership of means of production is with private individuals who work with the motive of making profits

3. Write the features of a capitalist economy
• Freedom for the entrepreneurs to produce any commodity
• Right to private property
• Profit motive
• Transfer of wealth to the legal heir
• Free market with no control over price
• Consumers sovereignty
• Competition among entrepreneurs to sell products

4. Why some nations are known as 'police state'?
• The main functions of these nations are to maintain law and order and to
defend the country from foreign invasion.

5. What is the price mechanism?
• The rise and fall in the price influence the producers and consumers and consequently control the availability of goods and services. This is called a price mechanism.

6. How price mechanism influence the producers and consumers?
• When the price of goods and services increase, the producers will have a tendency to make a profit through an increase in production. But as price increases, demand falls and thus the producers will have to reduce the production. 
• As the price of goods and services fall, producers try to reduce the output. But with a fall in price, demand increases and this will induce the producers to increase the production.

7. Write the limitations/disadvantages of the capitalist economy
• Accumulation of wealth in the hands of a few
• Economic disparity in society.

8. What do you meant by a Socialist economy?
• Socialist economy is an economic system in which the means of production are owned by the public sector.

9. Write the features of a socialist economy
• Works on centralised planning
• Activities aimed at social welfare
•  Absence of private entrepreneur
•  Absence of private ownership of wealth and transfer of wealth to the legal heir
•  Economic equality
• Price mechanism does not have any role in the socialist economy
• Through planning that the basic problems of a socialist economy are solved.

10. List the drawbacks of the socialist economy
     OR
What are the problems faced by the socialist economy?
• The public sector's investment potential is less and this affects economic growth adversely.
• In the absence of private ownership of wealth and transfer of wealth to the legal heir, people are less likely to work hard.
• The consumers have only a limited choice of products.

11. Name the economic system which has been adopted by India
• Mixed economy (features of both the capitalist economy and socialist economy)

12. Mixed economy is a characteristic of the Indian economy. What are the other Characteristics of a Mixed Economy?
• Existence of both private and public sectors.
• Economy works on the principle of planning
• Importance to welfare activities
• Existence of both freedom of private ownership of wealth and economic
control

13. Today, purely capitalist and socialist economies cannot be found in the
world. Substantiate.
• There is government intervention in capitalist economies like those in the United Kingdom and the United States of America.
• Private ownership of wealth and freedom of market have been permitted in socialist countries like China and Cuba.

14. What are the features of the new economic policy?
• Private entrepreneurs are encouraged.
• Attracting foreign investors.
• Flow of goods, services and technology.
• A wide variety of products are available in the markets.
15. What are the three features of economic policies started officially in 1991?
• Liberalisation, Privatisation, and Globalisation. (LPG )

16. What is Liberalisation?
• Liberalisation implies the relaxation of government control and influence over the economic activities in a country.

17. List out the changes that were brought as a result of liberalisation.
• Relaxation of control in setting up industries
•  Reduction of import tariff and tax
•  Changes in foreign exchange rules
• Abolition of market control
•  Permission of foreign investment in many sectors
• Reduced the role of government in the basic industries and basic infrastructure development.

18. Give examples of enterprises that have been privatised since 1991.
• Maruti Udyog Limited, Modern Food Industries Limited, etc.

19. Write short notes about BOT and PPP.
• BOT (Build Operate and Transfer): The private sector initiates the construction of infrastructure such as roads, bridges, etc and then reclaims the investment through tolls which are later transferred to the government.
• PPP (Public-Private Partnership): Certain undertakings are initiated under the partnership of both private and public sectors. The profit is shared in proportion to the amount invested. Example: Cochin International Airport Limited (C I A L )

20. What do you mean by Neoliberalisation.
• The new economic policies which completely disregard government control are known as Neoliberalisation.

21. Name the international financial institutions that play a major role in the implementation of globalization policies
• IMF
• World Bank.

22. What is Globalisation?
• Globalisation is the economic integration and interdependence of nations as a result of the free flow of capital, labour, goods and services, and exchange of technology irrespective of boundaries.

23. Which department in India handled the privatisation of public sector
enterprises and the trading of their shares?
• The Department of Disinvestments under the Ministry of Finance.

24. Name two international financial institutions which play a significant role in enforcing globalisation policies.
• World Bank and the International Monetary Fund (IMF)

25. List the factors which strengthened globalisation
• The growth of multinational companies
• The formation of the World Trade Organisation.
•  Improved communication
• The fast means of transportation

26. In which year the World Trade Organisation was established. Name its
headquarters
• 1 January 1995.
•  Geneva

27. Write the main guidelines of the trade agreements formed through the WTO.
• Phase by phase reduction of import duty.
• Reduction of subsidies
• Modification of patent laws
• Permitting foreign investment in service sectors such as media, telecommunication, banking, insurance, etc.
• Extension of the consideration given to domestic investments to foreign
investments.

28. What do you mean by Multinational companies? Give examples
• Multinational companies are those companies registered in the home country but operating in many countries.
• Eg: Nokia Corporation, Pepsi Co, Tata Consultancy Services

29.  Make a note on working of multinational companies
                  OR
Explain the operations of multinational companies
• Instead of producing goods in a country and exporting it to other countries, the multinational companies have invested their capital in
developing countries so that the raw materials, labour, and markets
available there can be used in their favour.
• To make changes favourable to them in the domestic policies and laws of a country.
• Start their production by merging with or acquiring domestic companies
• They pool their products into the market by utilising the production and distribution mechanisms of the domestic companies
• Multinational companies hand over the production to small scale entrepreneurs. The goods and services produced by the latter are sold under the brand name of multinational companies.
• Multinational companies also resort to assembling various parts of a
product produced in different countries. Manufacturing vehicles is done
in this method.

30. What is marketisation? Write the ultimate goal of marketisation.
• A situation where everything is available in the market and where things are available only in the market. This tendency is called marketisation.
• Profit

31. List out the changes that have been made through marketisation
• The market has now become free, extensive, and strong.
• Government control over the market is declining
• Many firms which were under the ownership of the government have been privatised
• Infrastructure development, basic industries, banking, insurance, etc. have come under the scope of the market
32. Write any five arguments for and against new economic policies.
Arguments in favour of new economic policies:
• Availability of wide varieties of products in the market
• Ability to use the most advanced technology
• Fall in price due to increased competition
• Increase in exports
• Entry of companies into foreign trade
Arguments against new economic policies
• Increase in economic disparity
• Excess exploitation of the natural resource
• Import leads to falling in the price of domestic products
• Job security declines
• Government loses control over the economic system

Practice Questions and Answers
33. Which of the following is not a statement related to the Free Trade Agreement constituted by the WTO?
a. Reduction of subsidies.
b. Increase the import duty step by step.
c. Modification of patent laws.
d. Extention of the consideration patent given to domestic investments to foreign investment.
Answer: b. Increase the import duty step by step.

34. Why is the capitalist economy called a 'police state'?
• Government intervention in the economy is very little.
• The main function of the nation is to maintain law and order and to defend foreign invasions.

35. Which of the following is not an argument for new economic policies?
(Exports increase, variety of products available in the market, government's ability to control the economy diminishes, national income increases)
Answer:
• Governments ability to control the economy diminishes
• National income increases

36. What is the name of the market situation ‘where everything is available in the market and where things are available only in the market’?
• Marketisation

37. Write any three economic measures adopted by India as a part of liberalization?
• Relaxation of control in setting up industries
• Reduction of import tariff and tax
• Changes in foreign exchange rules.
• Abolition of market control
• Permission of foreign investment in many sectors
• Reduced the role of government in the basic industries and basic infrastructure development. 
(any three)

38. The proposals in the Free Trade Agreement are those that reinforce liberalization and globalization. Write down the key proposals?
• Phase by phase reduction of the import duty
• Reduction of subsidies
• Modification of patent law
• Permitting foreign investment in service sectors.
• Allow foreign investment in services.

39. What are the problems faced by the socialist economy?
• The public sector's investment potential is less and this affects economic growth adversely.
• In the absence of private ownership of wealth and transfer of wealth to the legal heir, people are less likely to work hard.
• Moreover, the consumers have only a limited choice of products.

40. How do the turn over of multinational companies affect developing countries?
• The involvement of multinational corporations in the domestic policies and laws of countries
 
41. What are the functions of the Department of Disinvestment?
• Privatization of PSEs.
• Stock market
42. Name the new economic policies which completely abolish government regulations
• Neo-liberalization

43.  Today, purely capitalist and socialist economies cannot be found in the world. Substantiate with example.
• The existing countries of the USA and U.K. capitalist regimes operate under governmental regulations.
• Socialist economies such as Cuba and China have allowed private property and free markets in existing countries.

44. Which of the following is not a  feature of a socialist economy?
(Economic equality, public welfare, public and private sector exist, lack of private property)
• The public and private sectors exist.
• Lack of private property

45. Prepare a note about  three features  of the capitalist economy and the socialist economy
The capitalist economy
• Freedom for the entrepreneurs to produce any commodity
• Right to private property
• Profit motive
• Transfer of wealth to a legal heir
• Free market with no control over price
• Consumers sovereignty
• Competition among entrepreneurs to sell products
Socialist Economy
• Activities aimed at social welfare
• Absence of private entrepreneur
• Absence of private ownership of wealth and transfer of wealth to a legal heir
• Economic equality


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