Q7. Which of the following activities constitute the real sector in the economy?
- Farmers harvesting their crops
- Textile mills converting raw cotton into fabrics
- A commercial bank lending money to a trading company
- A corporate body issuing Rupee Denominated Bonds overseas
Select the correct answer using the code given below:
a) 1 and 2 only
b) 2, 3 and 4 only
c) 1, 3 and 4 only
d) 1, 2, 3 and 4
Answer (a)
- Options 1 and 2 are correct: The real sector of an economy is the key section as activities of this sector persuade economic output and is represented by those economic segments that are essential for the progress of the GDP of the economy. For instance, farmers harvesting their crops or textile mills converting raw cotton into fabrics ensure an increase of economic output and in turn progress of GDP. The sector is crucial for the sustainability of the economy because of its productive capability to meet nations’ aggregate demand.
- Options 3 and 4 are incorrect: The Financial sector is a section of the economy made up of firms and institutions that provide financial services to commercial and retail customers. The financial sector generates a good portion of its revenue from loans and mortgages. This sector comprises a broad range of industries including banks, investment companies, insurance companies, and real estate firms. Thus, a commercial bank lending money to a trading company or a corporate body issuing rupee-denominated bonds overseas constitutes financial sector activities and not real sector activities.
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