Consider the following statements:
(A) Apart from the private sector, the government plays a very important role in the economy.
(B) An economy in which there is both the private sector and the government is known as a mixed economy.
(C) The government intervenes in the economy to increase the welfare of the people.
(D) The three functions of allocation, redistribution and stabilisation operate through the monetary policy of the central bank.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A), (B) and (C) only
The government acts on the economy through its budget, that is, its expenditure and receipts.
(A) Apart from the private sector, the government plays a very important role in the economy. — Correct. Besides private firms and households, the government shapes economic life.
(B) An economy in which there is both the private sector and the government is known as a mixed economy. — Correct. Both sectors work side by side in such an economy.
(C) The government intervenes in the economy to increase the welfare of the people. — Correct. Welfare is the aim of its intervention.
(D) The three functions of allocation, redistribution and stabilisation operate through the monetary policy of the central bank. — Incorrect. They operate through the expenditure and receipts of the government. Monetary policy belongs to the RBI.
NCERT (2026-27): “We introduced the government in chapter one as denoting the state. We stated that apart from the private sector, there is the government which plays a very important role. An economy in which there is both the private sector and the Government is known as a mixed economy. …” “5.1.1 Objectives of Government Budget The government plays a very important role in increasing the welfare of the people. In order to do that the government intervenes in the economy in the following ways. …” “Summary … 2. The three functions of allocation, redistribution and stabilisation operate through the expenditure and receipts of the government.” |