UPSC Prelims 2022 Question:

Which of the following activities constitute real sector in the economy?

1. Farmers harvesting their crops
2. Textile mills converting raw cotton into fabrics
3. A commercial bank lending money to a trading company
4. A corporate body issuing Rupee Denominated Bonds overseas
   
   

Select the correct answer using the code given below:

Explanation:

• The real sector of an economy is the key section as activities of this sector persuade economic output and is represented by those economic segments that are essential for the progress of GDP of the economy. So, in this sense, farmers harvesting their crops and textile mills converting raw cotton into fabrics are included under real sector of an economy. So, points 1 and 2 are correct.
  
  
• The real sector of the economy consists of enterprises (nonfinancial corporations), households and nonprofit institutions serving households. From the point of view of monetary and financial statistics the households and nonprofit institutions serving households are in some cases combined into one subsector named “Other resident sectors”.
• A commercial bank lending money to a trading company and a corporate body issuing Rupee denominated Bonds overseas does not constitute the real sector. So, points 3 and 4 are not correct.
  
  

Therefore, option (1) is the correct answer.

Subject: Economics| Micro and Macroeconomics