Consider the following statements:
(A) Basic problems can be solved either through free interaction of individuals in the market or by a central authority.
(B) In a centrally planned economy, the central authority may try to achieve an allocation thought desirable for society.
(C) In a market system, the problems of what and how much to produce are solved through coordination brought about by price signals.
(D) For the major part of the twentieth century, the closest example of a centrally planned economy was India.
(E) In India, since Independence, the government has played a minor role in planning economic activities.
Which of the above statements are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (C) only
The central problems are solved either through the market or by a central authority. Real economies mix the two in different degrees.
(A) Basic problems can be solved either through free interaction of individuals in the market or by a central authority. — Correct. These are the two ways of organising economic activities.
(B) In a centrally planned economy, the central authority may try to achieve an allocation thought desirable for society. — Correct. The authority aims at what it thinks best for society as a whole.
(C) In a market system, the problems of what and how much to produce are solved through coordination brought about by price signals. — Correct. Prices carry the information that coordinates buyers and producers.
(D) For the major part of the twentieth century, the closest example of a centrally planned economy was India. — Incorrect. The closest example was China. India gave the government a major role but was not centrally planned in this way.
(E) In India, since Independence, the government has played a minor role in planning economic activities. — Incorrect. The government has played a major role in planning since Independence.
NCERT (2026-27): “1.3 Organisation of Economic Activities Basic problems can be solved either by the free interaction of the individuals pursuing their own objectives as is done in the market or in a planned manner by some central authority like the government.” “1.3.1 The Centrally Planned Economy … The central authority may try to achieve a particular allocation of resources and a consequent distribution of the final combination of goods and services which is thought to be desirable for society as a whole. …” “1.3.2 The Market Economy … Thus, in a market system, the central problems regarding how much and what to produce are solved through the coordination of economic activities brought about by the price signals.” “… The closest example of a centrally planned economy is the China for the major part of the twentieth century. In India, since Independence, the government has played a major role in planning economic activities. …” |