Which of the following is an example of "Public Production"? 1. Government providing cash transfers to households for purchasing food. 2. It involves the government directly producing goods and services. 3. Government providing scholarships to students in private colleges.

Correct Option The correct option is 2 only Explanation In economics, it is essential to distinguish between Public Production and Public Provision. - Public Production occurs when the government directly owns the means of production and produces goods or services itself. - Public Provision occurs when the government finances goods or services (usually through taxation) to ensure they are accessible, but the actual production may be carried out by private entities. Statement-wise Analysis: - Statement 1 is Incorrect: This is the definition of Public Production. It involves the government directly engaging in the creation of goods and services, such as electricity generation by a state-owned enterprise or defense equipment manufacturing by an Ordnance Factory. - Statement 2 is Correct: Providing cash transfers is a form of transfer payment. The government provides financial resources to households, but the actual goods (food) are produced by farmers or private firms, not the government. - Statement 3 is Incorrect: This is an example of Public Provision combined with Private Production. The government pays for the service (via scholarships), ensuring provision, but the service (education) is produced and delivered by a private college. Key Takeaway: Public Production refers strictly to the government's role as a producer/manufacturer, whereas Public Provision refers to the government's role as a financier ensuring access to goods/services.

Which of the following is an example of… - NCERT Class 12 Economics MCQ

NCERT Class 12 Economics — Chapter 7: Government Budget and the Economy

mcqmedium

Which of the following is an example of "Public Production"?

Government providing cash transfers to households for purchasing food.
It involves the government directly producing goods and services.
Government providing scholarships to students in private colleges.

NCERT textbook question

From NCERT Introductory Macroeconomics · Page 2

Options

A1 and 3 only
B1 only
C2 only
D1, 2 and 3

Did you get this right?

Solution

Correct Option

The correct option is

2 only

Explanation

In economics, it is essential to distinguish between Public Production and Public Provision.

Public Production occurs when the government directly owns the means of production and produces goods or services itself.
Public Provision occurs when the government finances goods or services (usually through taxation) to ensure they are accessible, but the actual production may be carried out by private entities.

Statement-wise Analysis:

Statement 1 is Incorrect: This is the definition of Public Production. It involves the government directly engaging in the creation of goods and services, such as electricity generation by a state-owned enterprise or defense equipment manufacturing by an Ordnance Factory.
Statement 2 is Correct: Providing cash transfers is a form of transfer payment. The government provides financial resources to households, but the actual goods (food) are produced by farmers or private firms, not the government.
Statement 3 is Incorrect: This is an example of Public Provision combined with Private Production. The government pays for the service (via scholarships), ensuring provision, but the service (education) is produced and delivered by a private college.

Key Takeaway:
Public Production refers strictly to the government's role as a producer/manufacturer, whereas Public Provision refers to the government's role as a financier ensuring access to goods/services.

Your note

More from Chapter 7: Government Budget and the Economy

With reference to "Plan and Non-Plan Expenditure", consider the following statements: 1. Plan revenue expenditure was exclusively for the defence sector. 2. Non-plan expenditure covered a vast range of general, economic, and social services of the government. 3. Defence services and interest payments were major components of Non-Plan expenditure. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the "Fiscal Responsibility and Budget Management Act (FRBMA), 2003": 1. It mandates the central government to increase the fiscal deficit to 5 % of GDP. 2. It prohibits the central government from borrowing from the RBI except for temporary cash mismatches. 3. It allows actual deficits to exceed targets on grounds of national security or natural calamity. Which of the statements given above is/are correct?

medium

Which of the following statements correctly compares the effect of "Government Transfers" vs "Government Expenditure" on equilibrium income? 1. Government expenditure has a larger impact on equilibrium income than an equivalent amount of transfers. 2. Transfers affect income more than government expenditure because they are fully spent. 3. The multiplier for transfers is smaller than the government expenditure multiplier.

medium

Consider the following statements regarding the "Fiscal Deficit" and "Government Debt": 1. Fiscal deficits have no impact on the stock of government debt. 2. Fiscal deficit is a flow variable, while government debt is a stock variable. 3. Interest payments on accumulated debt are excluded from the current fiscal deficit. Which of the statements given above is/are correct?

medium

Consider the following statements regarding "Proportional Taxes": 1. Under this system, the government collects a fixed amount of tax regardless of income. 2. Proportional taxes reduce the slope of the consumption function. 3. They act as an automatic stabiliser for the economy. Which of the statements given above is/are correct?

hard

Keep practising Chapter 7: Government Budget and the Economy

Work through every question from this NCERT chapter.

Browse all NCERT Class 12 Economics chapters