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:

Answer: A. Only activities 1 and 2 are part of the REAL SECTOR. The economy is divided into REAL SECTOR (production of goods and services, value addition) and FINANCIAL SECTOR (intermediating finance — banking, securities markets, insurance). (1) Farmers harvesting crops: REAL SECTOR. Primary production of agricultural output. (2) Textile mills converting raw cotton to fabric: REAL SECTOR. Secondary sector / manufacturing. (3) Commercial bank lending money to trading company: FINANCIAL SECTOR. Banking intermediation activity. (4) Corporate issuing Rupee Denominated Bonds overseas: FINANCIAL SECTOR. Capital market financing activity (Masala Bonds). Activities 1 and 2 produce real goods; activities 3 and 4 are financial intermediation. So A is the answer. Source: NCERT Class 12 Macroeconomics Ch 2 (National Income Accounting).