Explain the working of the economy of capitalisty country?

EduRev

All Courses

Explore Courses UPSC Exam UPSC Test Series Free Notes EduRev Infinity

Open App

Commerce Exam > Commerce Questions > Explain the working of the economy of capital...

Join the Discussion on the App

Explain the working of the economy of capitalisty country?

Join for Free

Join for Free

Verified Answer

Explain the working of the economy of capitalisty country?

Working of a Capitalist Economy

Right to Private Property: This is the essence of capitalism. This right means that private property such as property, factories, machines, plants etc. can be owned under private individuals and companies. The three things covered under this right are:

Every individual can acquire any amount of property, He can use these properties as he wishes, He also has the right of inheritance. So he can inherit the property from his forefathers. And he can also pass it on to his successors on his death.

Price Mechanism: Price mechanism is like an invisible hand that controls the workings of a capitalist economy. The forces of supply and demand will determine the prices and the level of productions in the economy. The government will not have any interference in this matter.

Profit Motive: The driving force behind any capitalist economy is the profit motive. All companies wish to produce and sell their products to maximize their profits. This also induces healthy competition in the economy.

Freedom of Enterprise: In capitalism, every individual is free to make his own economic choices without any intervention. This includes both the consumer and the producers.

So a producer is free to produce any goods or services. And the consumer is free to buy whatever he desires and from whomever, he wants without restrictions.

This question is part of UPSC exam. View all Commerce courses

View all answers Start learning for free

Explore Courses for Commerce exam

Similar Commerce Doubts

Explain the working of the economy of a capitalist country?

View answer

Read the following case study paragraph carefully and answer the question based on the same.The central bank of India i.e. Reserve Bank of India is the apex institution that controls the entire financial market. It’s one of the major functions is to maintain the reserve of foreign exchange. Also, it intervenes in the foreign exchange market to stabilize the excessive fluctuation in the foreign exchange rate.In other words, it is the central bank’s job to control a country’s economy through monetary policy; if the economy is moving slowly or going backward, there are steps that the central bank can take to boost the economy. These steps, whether they are asset purchases or printing more money, all involve injecting more cash into the economy. The simple supply and demand economic projection occurs and currency will devalue.When the opposite occurs, and the economy is growing, the central bank will use various methods to keep that growth steady and in-line with other economic factors such as wages and prices. Whatever the central bank does or doesn’t do, will affect the currency of that country. Sometimes, it is within the central bank’s interest to purposefully affect the value of a currency. For example, if the economy is heavily reliant on exports and their currency value becomes too high, importers of that country’s commodities will seek cheaper supply; hence directly affecting the economy.Q. Which of the following steps should be taken by the central bank if there is an excessive rise in the foreign exchange rate?

View answer

Read the following case study paragraph carefully and answer the question based on the same.The central bank of India i.e. Reserve Bank of India is the apex institution that controls the entire financial market. It’s one of the major functions is to maintain the reserve of foreign exchange. Also, it intervenes in the foreign exchange market to stabilize the excessive fluctuation in the foreign exchange rate.In other words, it is the central bank’s job to control a country’s economy through monetary policy; if the economy is moving slowly or going backward, there are steps that the central bank can take to boost the economy. These steps, whether they are asset purchases or printing more money, all involve injecting more cash into the economy. The simple supply and demand economic projection occurs and currency will devalue.When the opposite occurs, and the economy is growing, the central bank will use various methods to keep that growth steady and in-line with other economic factors such as wages and prices. Whatever the central bank does or doesn’t do, will affect the currency of that country. Sometimes, it is within the central bank’s interest to purposefully affect the value of a currency. For example, if the economy is heavily reliant on exports and their currency value becomes too high, importers of that country’s commodities will seek cheaper supply; hence directly affecting the economy.Q. Dear money policy of the central bank, which is used to keep the growth steady and in-line with other economic factors, refers to

View answer

Read the following case study paragraph carefully and answer the question based on the same.The central bank of India i.e. Reserve Bank of India is the apex institution that controls the entire financial market. It’s one of the major functions is to maintain the reserve of foreign exchange. Also, it intervenes in the foreign exchange market to stabilize the excessive fluctuation in the foreign exchange rate.In other words, it is the central bank’s job to control a country’s economy through monetary policy; if the economy is moving slowly or going backward, there are steps that the central bank can take to boost the economy. These steps, whether they are asset purchases or printing more money, all involve injecting more cash into the economy. The simple supply and demand economic projection occurs and currency will devalue.When the opposite occurs, and the economy is growing, the central bank will use various methods to keep that growth steady and in-line with other economic factors such as wages and prices. Whatever the central bank does or doesn’t do, will affect the currency of that country. Sometimes, it is within the central bank’s interest to purposefully affect the value of a currency. For example, if the economy is heavily reliant on exports and their currency value becomes too high, importers of that country’s commodities will seek cheaper supply; hence directly affecting the economy.Q. Which of the following tools are used by the central bank to control the flow of money in the domestic economy?

View answer

Read the following hypothetical text and answer the question that follow:The performance of the Indian economy during the period of first seven five-year plans (1950-1990) was satisfactory if not very impressive. On the eve of independence, India was an industrially backward country, but during this period of first seven plans our industries became far more diversified, with the stress being laid on the public investments in the industrial sector. The policy of import substitution led to protection of the domestic industries against the foreign producersbut we failed to promote a strong export surplus. Although public sector expanded to a large extent but it could not bring desired level of improvement in the secondary sector. Excessive government regulations prevented the natural trajectory of growth of entrepreneurship as there was no competition, no innovation and no modernization on the front of the industrial sector. Many Public Sector Undertakings (PSUs) incurred huge losses due to operational inefficiencies, red-tapism, poor technology and other similar reasons. These PSUs continued to function because it was difficult to close a government undertaking even it is a drain on country’s limited resources. On the Agricultural front, due to the measures taken under the Green Revolution, India more or less became self-sufficient in the production of food grains. So, the needs for reform of economic policy was widely felt in the context of changing global economic scenario to achieve desired growth in the country.Q. Inward looking trade strategy aimed at _________ .

View answer

Top Courses for CommerceView all

Chapter Notes for Commerce

Economics Class 12

Economics Class 11

NCERT Books & Solutions for Commerce

Economics for CBSE Class 12 Board Examinations

Top Courses for Commerce

View all

Explain the working of the economy of capitalisty country?

Share with a Friend

Answer this doubt

Question Description
Explain the working of the economy of capitalisty country? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Explain the working of the economy of capitalisty country? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Explain the working of the economy of capitalisty country?.

Solutions for Explain the working of the economy of capitalisty country? in English & in Hindi are available as part of our courses for Commerce. Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.

Here you can find the meaning of Explain the working of the economy of capitalisty country? defined & explained in the simplest way possible. Besides giving the explanation of Explain the working of the economy of capitalisty country?, a detailed solution for Explain the working of the economy of capitalisty country? has been provided alongside types of Explain the working of the economy of capitalisty country? theory, EduRev gives you an ample number of questions to practice Explain the working of the economy of capitalisty country? tests, examples and also practice Commerce tests.

Explore Courses for Commerce exam