Question 7
1. Farmers harvesting their crops
2. Textile mills converting raw cotton into fabrics
3. A commercial bank lending money to a trading company
4. A corporate body issuing Rupee Denominated Bonds overseas
Select the correct answer using the code given below:
AOptions
BSolution
The "real sector" of an economy refers to the part of the economy that produces goods and services, as opposed to the "financial sector" which deals with financial assets and services.
Let's analyze each activity:
1. Farmers harvesting their crops: This is a direct act of producing agricultural goods. It clearly belongs to the real sector (primary sector within the real economy). This statement is correct.
2. Textile mills converting raw cotton into fabrics: This is a manufacturing activity, transforming raw materials into finished goods. It belongs to the real sector (secondary sector within the real economy). This statement is correct.
3. A commercial bank lending money to a trading company: This is a financial intermediation activity. Banks facilitate the flow of funds from savers to borrowers, which is part of the financial sector, not the real sector's production of goods and services. This statement is incorrect.
4. A corporate body issuing Rupee Denominated Bonds overseas: This is a fundraising activity in the capital markets, involving financial instruments (bonds). This also belongs to the financial sector, as it facilitates capital flows, rather than directly producing goods or services. This statement is incorrect.
CStrategy
To answer questions about economic sectors, have a clear understanding of the fundamental distinction between the real economy (production of goods and services) and the financial economy (dealing with money, credit, and financial assets). Think about whether the activity directly results in a tangible good or service, or if it involves money flows and financial instruments.
DSyllabus Analysis
This question is from the Indian Economy section, focusing on basic economic concepts and the classification of economic activities.
EQuestion Analysis
Easy to Medium. It tests a fundamental concept of economic classification.