Economics and Development: Sectors, Money, Poverty and Sustainability
Economics asks you to classify activity, explain how money and credit work, and judge development against social and environmental costs. Numerical questions are usually simple percentages or sector shares.
Production and sectors
- Factors of production: land, labour, capital and entrepreneurship; each earns rent, wages, interest and profit.
- Primary sector draws directly from nature (agriculture, mining, fishing); secondary transforms materials (manufacturing, construction); tertiary provides services (transport, banking, education).
- GDP measures output produced within a country's borders; GNP measures income of residents, including net income from abroad.
Money, banking and development issues
- The Reserve Bank of India, established in 1935 and nationalised in 1949, issues currency, controls credit and acts as banker to the government and banks.
- Banks create credit by lending a large part of deposits while keeping reserves.
- Poverty is measured against a poverty line; unemployment can be open, seasonal or disguised.
- Sustainable development meets present needs without compromising future generations (Brundtland Report, 1987); it requires resource efficiency, renewable energy and pollution control.
Worked example
Ten workers cultivate a field that needs only five. Nobody loses a job, but output does not rise. What type of unemployment is this? Reasoning: all ten appear employed, but five add nothing to output. This is disguised unemployment, typical of family farms in the unorganised sector. It differs from open unemployment, where people actively seek work and find none.
Traps that cost marks
- Treating mining as secondary; it belongs to the primary sector in this syllabus.
- Confusing GDP with GNP.
- Calling all poverty "absolute"; relative poverty compares incomes within a society.
- Writing "sustainable" as a synonym for "long-lasting" without mentioning resource use or the environment.