Real vs. Money Flows, Economic Growth & Trade
Real and Money Flows
Give two examples each of real flows and money flows.
Answer:
Real Flows:
Goods and Services: The exchange of physical goods and services in the economy represents a real flow. For example, when a customer purchases a laptop from a store, it involves the flow of the physical laptop from the store to the customer.
Labor Services: The provision of labor services by individuals to businesses or employers is a real flow. When a person works in a factory, office, or any job, their physical effort and skills contribute to the production process.
Money Flows:
Wages and Salaries: Payments made by employers to employees in the form of wages or salaries represent money flows. This includes the regular income received by individuals for their labor services.
Interest Payments: When individuals or businesses receive interest payments from their investments or loans, it involves the flow of money. For example, a bank paying interest to a customer with a savings account is a money flow.
Real flows involve the actual transfer or exchange of physical goods and services, while money flows represent the movement of currency or financial transactions related to economic activities.
Government Steps for Economic Growth in India
Explain any three steps taken by the government to achieve higher economic growth in India.
Answer: The Indian government has implemented various steps and policies to achieve higher economic growth in the country. Here are three significant measures:
Economic Reforms and Liberalization:
Starting in the early 1990s, India initiated a series of economic reforms and liberalization measures to open up the economy to the global market. This included reducing trade barriers, deregulating industries, and encouraging foreign direct investment (FDI). The key policy initiatives during this period were:
- Liberalization of Trade: India significantly reduced tariffs and import restrictions, allowing for greater competition and access to foreign markets. This increased competition drove efficiency and innovation in domestic industries.
- Industrial Deregulation: The government reduced the licensing requirements and regulations in many industries, encouraging private sector participation and entrepreneurship.
Importance of International Trade
State any four ways the importance of international trade?
Answer: The importance of international trade is significant for both individual countries and the global economy. Here are four key ways in which international trade is important:
Economic Growth:
International trade allows countries to expand their markets beyond their domestic borders. This leads to increased sales and production, which in turn stimulates economic growth. Exporting goods and services to foreign markets can be a major driver of economic development.
Resource Utilization:
Different countries have varying levels of resources, skills, and expertise. International trade allows nations to specialize in producing goods and services in which they have a comparative advantage. By doing so, they can maximize