‘The Government and policy makers use statistical data to formulate suitable policies of economic development’. Illustrate with two examples.
The Government and policy makers rely on statistical data to make informed decisions and formulate appropriate economic policies that solve economic problems. Statistical methods help in analysing serious economic issues like rising prices, growing population, unemployment, and poverty.
Example 1: In times of rising global oil prices, the government needs to decide how much oil India should import. This decision depends on the expected domestic production of oil and the likely demand for oil. Without statistical methods, it is impossible to determine these figures accurately. Thus, statistics provide the vital information needed to make import decisions.
Example 2: An economic planner needs to decide the production plan for the economy for a future year, such as 2020. This requires knowledge of the expected level of consumption in 2020. Statistical tools help predict consumption based on data from past years or recent surveys, enabling proper planning.
Explanation
This question tests the student's understanding of the role of statistics in economic policy formulation. The textbook context provides clear examples: (1) Oil import decisions based on expected domestic production and demand, and (2) Production planning based on predicted consumption levels. The answer should demonstrate how statistical data enables evidence-based decision making rather than subjective judgement.
Solution Steps
Step 1: Explain the general role of statistics in policy formulation
Step 2: Provide first example (oil import decision) with key statistical factors
Step 3: Provide second example (production planning) with key statistical factors