Question
Q7) Which of the following activities constitutes a real sector in the economy?
- Farmers harvesting their crops.
- Textiles miles 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:
- 1 and 2 only
- 2, 3 and 4 only
- 1, 3 and 4 only
- 1, 2, 3 and 4
Answer: a
Detailed Explanation
The real sector of an economy
The real sector of the economy refers to the part of the economy that produces goods and services, encompassing activities related to agriculture, manufacturing, and services that directly contribute to the production of tangible products. It contrasts with the financial sector, which focuses on financial transactions and services.
The sector generates better outcomes if accompanied by a healthier financial system; thus, the advancement of the financial sector is a means for the growth of the real sector.
Its statistics cover data and indicators of production in both agricultural and industrial sectors, gross domestic products (GDP), private investment and consumption, wholesale and consumer price indices/inflation, and employment.
The real sector of the economy deals with the production side, while the nominal economy deals with the financial side. Therefore, Farmers harvesting their crops and Textile mills converting raw cotton into fabrics are the parts of the Real Sector of the Economy. Hence, statements 1 and 2 are correct.
Financial activities majorly support real(production) activity but do not contribute itself too much except the factor incomer it generates. Therefore, A commercial bank lending money to a trading company and A corporate body issuing Rupee Denominated Bonds overseas is part of the financial sector. Hence, statements 3 and 4 are not correct.
