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Samacheer Kalvi 11th Commerce Solutions Chapter 17 Social Responsibility of Business and Business Ethics

Students can Download Commerce Chapter 17 Social Responsibility of Business and Business Ethics Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 17 Social Responsibility of Business and Business Ethics

Samacheer Kalvi 11th Commerce Social Responsibility of Business and Business Ethics Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
Which type of Responsibility gives the benefit to the Society out of its profits earned?
(a) legal
(b) Ethical
(c) Moral
(d) Economic
Answer:
(c) Moral

Question 2.
The Stakeholders of Socially Responsible business units are except ……………..
(a) Share holders
(b) Employees
(c) Government
(d) Company
Answer:
(d) Company

Question 3.
Assuming Social Responsibility of business helps the enterprise in
(a) Increase profit
(b) Decrease profit
(c) Sustainability
(d) Equilibrium
Answer:
(c) Sustainability

Question 4.
Socially Responsible business provides goods at ……………..
(a) High price
(b) Low price
(c) Reasonable price
(d) Moderate price
Answer:
(c) Reasonable price

Question 5.
Social Responsibility towards employees represents the following except ……………..
(a) Reasonable remuneration
(b) Proper facilities
(c) Social security
(d) Exploitation
Answer:
(d) Exploitation

II. Very Short Answer Questions

Question 1.
What do you mean by Social Responsibility?
Answer:
It is the idea that businesses should balance profit-making activities with activities which give benefits to society. The benefits which are earned through society are known as the Social Responsibility of business.

Question 2.
Give the meaning of Social Power.
Answer:
Businessmen have considerable social power. Their decisions and actions affect the lives and fortunes of society. Businessmen should assume social obligations commensurate with their social power.

Question 3.
What is a free enterprise?
Answer:
A business enterprise that accepts and discharges social obligations enjoys greater freedom. Social responsibilities are essential for avoiding governmental action against the business. The concerns which do not have the policy of following such rules are known as Free enterprises.

Question 4.
Who are called Stakeholders?
Answer:
A business organisation is a coalition of several interest groups are called stakeholders. Example – shareholders, customers, employees, suppliers, etc. Business should, therefore, work for the interest of all of them rather than for the benefit of shareholders /owners alone.

Question 5.
What is ethical Responsibility?
Answer:
The behaviour of the firm is expected by society but not codified in law. For example, respecting the religious sentiments and dignity of people while advertising for a product.

III. Short Answer Questions

Question 1.
Define the Concept of Social Responsibility?
Answer:
“Social Responsibility requires managers to consider whether their action is likely to promote the public good, to advance the basic beliefs of our society, to contribute to its stability, strength and harmony” – Peter F. Drucker.

Question 2.
Why you do think Social Responsibility of business is needed?
Answer:
Social Responsibility is needed for the following reasons:

Self – Interest
Law and order
Creation of Society
Moral Justification
Social power
Socio-cultural Norms
The image in the society
Professionalism
Public awareness
Trusteeship
Free enterprise

Question 3.
What are the benefits derived by employees of a Socially Responsible business enterprise?
Answer:

Timely and regular payment of wages and salaries.
Proper working conditions and welfare amenities.
Opportunity for better career prospects.
Job security as well as social security like facilities of provident fund, group insurance, pension, retirement benefits, etc.

Question 4.
Enumerate the points relating to why business units are Socially Responsible?
Answer:
The following are the main points to be considered while turning the business units into socially responsible one.

Protection of Stakeholders Interest
Legitimacy
Promotion of Society
Competence
Assessment of Social Impact
Professional conduct
Organized Social power
Public opinion

Question 5.
List the kinds of Social Responsibility.
Answer:

Economic responsibility
Legal responsibility
Ethical responsibility
Discretionary responsibility

IV. Long Answer Questions

Question 1.
Explain in detail the concept and need for Social Responsibility?
Answer:

Concept of Social Responsibility:
The term social responsibility is defined in various ways. Every businessman earns prosperity from business and should give back the benefit of this prosperity to society. This is voluntary. This benefit is the moral responsibility of business. As this benefit is supposed to be passed on to society, it can be said to be social responsibility of business.

Need for Social Responsibility:
Business is expected to be responsible to society due to the following reasons:

Self-Interest:
A business unit can sustain in the market for a longer period only by assuming some social obligations. For example, provision of higher wages and good working conditions motivates workers to work hard and produce more. Labour turnover and absenteeism are reduced.

Creation of Society:
Business is a creation of society and uses the resources of society. Therefore, it should fulfil its obligations to society. In the long run a successful business can be built on the foundations of a happy community and a satisfied work force.

Social Power:
Businessmen have considerable social power. Their decisions and actions affect the lives and fortunes of the society. They collectively determine for the nation such important matters as level of employment, rate of economic progress and distribution of income among various groups. It is, therefore, the moral and right thing for business enterprises to assume social obligations.

Organized Social Power:
Large corporations have acquired tremendous social power through their multifarious operations. Social power may be misused in the absence of social responsibility. There should be an equilibrium between social power and social responsibility.

Image in the Society:
A business can improve its image in public by assuming social obligations. Good relations with workers, consumers, and suppliers help in the success of the business. Social obligations improve the confidence and faith of people in a business enterprise.

Public Awareness:
Nowadays consumers and. workers are well informed about their rights. Consumers expect better quality products at reasonable prices. Similarly, workers desire fairness. wages. and other benefits. They exercise pressure on the employer’s through-trade unions. There will be industrial unrest and conflict in society if the business does not fulfill its obligations.

Question 2.
Answer:
Illustrate with examples the arguments for Social Responsibility?
Answer:

Protection of Stakeholders Interest: A business organisation is a coalition of several interest groups or stakeholders. Example – shareholders, customers, employees, suppliers, etc.
Promotion of Society: Business is a subsystem of society. It draws support and sustenance from society in the form of inputs. Socially responsible behaviour is essential to sustain this relationship between business and society.
Assessment of Social Impact: During the course of its functioning, a business enterprise makes several decisions and actions. Its activities exercise a strong influence on the interests and values of society.
Organised Social Power: Large corporations have acquired tremendous social power through their multifarious operations. Social power may be misused in the absence of social, responsibility.
Legitimacy: It is in the enlightened self-interest of business to assume social responsibility.
Competence: Business organisations and their managers have proved their competence and leadership in solving economic problems.
Professional Conduct: Professional managers are required to display a keen social sensitivity and serve the society as a whole.
Public Opinion: Adoption of social responsibility as an objective will help to improve the public opinion of business.

Question 3.
Discuss the different groups that benefited from the Social Responsibility of business?
Answer:
The business generally interacts with owners, investors, employees, suppliers, customers, competitors, government, and society. They are called interest groups because, by each and every activity of the business, the interest of these groups is affected directly or indirectly.

The groups on which the business is interested in given below:
Responsibility towards Owners:
Owners are the persons who own the business. They contribute capital and bear the business risks. The primary responsibilities of a business towards its owners are to

Run the business efficiently.
Proper utilization of capital and other resources.
Growth and appreciation of capital.
A regular and fair return on capital invested.

Responsibility towards Investors:
Investors are those who provide finance by way of investment in debentures, bonds, deposits etc. Banks, financial institutions, and investing public are all included in this category.
The responsibilities of a business towards its investors are:

Ensuring the safety of their investment.
Regular payment of interest.
Timely repayment of the principal amount.

Responsibility towards Employees:
Business needs employees or workers to work for it. These employees put their best effort for the benefit of the business. So it is the prime responsibility of every business to take care of the interest of their employees. If the employees are satisfied and efficient, then the only business can be successful. The responsibilities of business towards its employees include:

Timely and regular payment of wages and salaries.
Proper working conditions and welfare amenities.
Opportunity for better career prospects.
Job security as well as social security like facilities of provident fund, group insurance, pension, retirement benefits, etc.
Better living conditions like housing, transport, canteen, creches, etc.
Timely training and development.

Responsibility towards Suppliers:
Suppliers are businessmen who supply raw materials and other items required by manufacturers and traders. Certain suppliers, called distributors, supply finished products to the consumers. The responsibilities of business towards these suppliers are:

Giving regular orders for the purchase of goods
Dealing on fair terms and conditions.
Availing reasonable credit period.
Timely payment of dues.

Responsibility towards Customers:
No business can survive without the support -of customers. As a part of the responsibility of business towards them the business should provide the following facilities:

Products and services must be able to take care of the needs of the customers.
Products and services must be qualitative
There must be regularity in the supply of goods and services

Question 4.
How do you classify Social Responsibility?
Answer:
1. Economic responsibility:
A business enterprise is basically an economic entity and, therefore, its primary social responsibility is economic i.e., produce goods and services that society wants and sell them at a profit.

2. Legal responsibility:
Every business has a responsibility to operate within the laws of the land. Since these laws are meant for the good of society, a law-abiding enterprise is a socially responsible enterprise as well.

3. Ethical responsibility:
This includes the behavior of the firm that is expected by society but not codified in law. For example, respecting the religious sentiments and dignity of people while advertising for a product. There is an element of voluntary action in performing this responsibility.

4. Discretionary responsibility:
This refers to the purely voluntary obligation that an enterprise assumes, for instance, providing charitable contributions to educational institutions or helping the affected people during floods or earthquakes.

It is the responsibility of the company management to safeguard the capital investment by avoiding speculative activity and undertaking only healthy business ventures which give good returns on investment.

Samacheer Kalvi 11th Commerce Social Responsibility of Business and Business Ethics Additional Questions and Answers

I. Choose the Correct Answer:

Question 1.
Management of business enterprises is being
(a) Professionalism
(b) Law and order
(c) Free enterprise
(d) Public awareness
Answer:
(a) Professionalism

Question 2.
How many kinds of Social Relationship of business?
(a) Two
(b) Three
(c) Four
(d) Five
Answer:
(c) Four

II. Very Short Answer Questions

Question 1.
What is Legal responsibility?
Answer:
Every business has a responsibility to operate within the laws of the land. Since these laws are meant for the good of society, a law-abiding enterprise is a socially responsible enterprise as well.

Question 2.
What is Public awareness?
Answer:
Now – a – days consumers and workers are well informed about their rights. Consumers expect better quality products at reasonable prices. Similarly, workers desire fair wages and other benefits.

Samacheer Kalvi 11th Commerce Solutions Chapter 24 Retailing

Leave a Comment / Class 11 / By Bhagya

Students can Download Commerce Chapter 24 Retailing Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 24 Retailing

Samacheer Kalvi 11th Commerce Retailing Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
Retailers deal in ……………… quantity of goods.
(a) Small
(b) Large
(c) Medium
(d) Limited
Answer:
(a) Small

Question 2.
Small scale Fixed retailers include ………………
(a) General stores
(b) Pedlars
(c) Cheap Jacks
(d) Hawkers
Answer:
(a) General stores

Question 3.
Small shops which deal in a particular line of products are called as ………………
(a) Market traders
(b) Single line stores
(c) Retailer
(d) Consumers
Answer:
(b) Single line stores

Question 4.
……………… are mobile traders Who deal in low priced articles with no fixed place of business.
(a) Shopping malls
(b) Supermarkets
(c) Street stalls
(d) Itinerant traders
Answer:
(d) Itinerant traders

II. Very Short Answer Questions

Question 1.
What is Retailing?
Answer:
Retailing is the process of selling goods and services directly to the ultimate consumers in small quantities.

Question 2.
State the meaning of multiple shops.
Answer:
A number of identical retail shops with similar appearance normally deal in standardised and branded consumer products established in different localities owned and operated by manufacturers or intermediaries are called Chain stores or Multiple shops.

Question 3.
Mention any two benefits of Vending machines.
Answer:

Vending machines are placed at a convenient location.
The buyer himself inserts the coin or the token and receives the quantity of the product from the machine.

Question 4.
What are specialty stores?
Answer:
Specialty Stores deal in a particular type of product under one product line only. For example, Sweets shop specialised in Tirunelveli Halwa, Bengali Sweets, etc.

III. Short Answer Questions

Question 1.
Explain the features of general stores.
Answer:
General Stores sell a wide variety of products under one roof, most commonly found in a local market and residential areas to satisfy the day-to-day needs of the customers residing in nearby localities. For example, a provision store deals in grocery, bread, butter, toothpaste, soaps, washing powder, soft drinks, confectionery, stationery, cosmetics, etc.
The following are the main features of general stores:

They remain open for long hours at convenient timings.
Often provide credit facilities to their regular customers.

Question 2.
Give any four points of distinction between the hire purchase system and the installment system of selling.
Answer:
Hire Purchase System:

It is a system by which the seller agrees to sell the articles to the buyer on the condition that the payment of the article will be made in a fixed number of installments till the sale price is paid.
Though the buyer gets possession of the goods immediately on signing the contract the ownership does not pass on till the payment of the last installment.
The buyer prefers to pay a lump sum or a part of the price initially i.e., down payment and the balance in installments as per the contract.
The seller continues to be the owner of the article till then.

Installment System:

Installment system is a type of purchase in which the price amount of the product is not paid initially but in installments.
Title or ownership of articles as well as possession is passed on to the buyer as soon as the first installment is paid.
It is also called a deferred payment system.
On default of payment, the seller cannot seize the article but recover the dues through the court.

Question 3.
Explain the characteristics of supermarkets.
Answer:
The important characteristics of a supermarket are listed below:

Supermarkets are generally situated at the main shopping centres.
The goods kept on racks with the clearly labelled price and quality tags in such stores,
The customers move into the store to pick up goods of their requirements, bring them to the cash counter, make a payment, and take home delivery.
The goods are sold on a cash basis only. No credit facilities are made available.
Supermarkets are organised on a departmental basis.
It requires a huge investment.

Question 4.
What is meant by ‘mail-order retailing’?
Answer:
Mail order houses are the retail outlets that sell their merchandise through mail. There is generally no direct personal contact between the buyers and the sellers in this type of trading.

IV. Long Answer Questions

Question 1.
State the features of Departmental stores.
Answer:
Meaning:
A Departmental Store is a large retail establishment offering a wide variety of products, classified into well-defined departments. Each department is like a separate shop with centralised purchasing, selling and accounting.
Features of Departmental Store:
Large Size:
A department is a large scale retail showroom requiring a large capital investment by forming a joint-stock company managed by a board of directors. There is a Managing Director assisted by a general manager and several department managers.

Wide Choice:
It acts as a universal provider of a wide range of products from low priced to very expensive goods (Pin to Car) to satisfy all the expected human needs under one roof.

Departmentally organised: ,
Goods offered for sale are classified into various departments. Each department specializes in one line of products and operates as a separate unit.

Facilities provided:
It provides a number of facilities and services to the customers such as restaurants, restrooms, recreation, packing, free home delivery, parking,etc.

Centralised purchasing:
All the purchases are made centrally and directly from the manufacturers and operate separate warehouses whereas sales are decentralised in different departments.

Question 2.
What is meant by Consumer Cooperative Store? Explain its merits in brief.
Answer:
A consumer cooperative store is a retail organization owned, managed, and controlled by the consumers themselves to obtain products of daily use at reasonable low prices. Its objective is to eliminate profits to middlemen by establishing direct contact with the manufacturers.

People belonging to middle and low-income groups, at least 25 persons have to come together 1 to form a voluntary association, and get it registered under the Cooperative Societies Act. The capital of a cooperative store is raised by issuing shares to members. The management of the store is democratic and entrusted to an elected managing committee, where “one man one vote” is the rule.

The cooperative stores are very famous in Tamil Nadu. For example, Kamadhenu and Chinthamani cooperative supermarkets in Chennai, Karpagam in Vellore, etc.

Question 3.
Describe the role of chambers of commerce in the promotion of internal trade.
Answer:
Role of Associations or Chambers

Transportation or inter-state movement of goods: The Chambers facilitate registration of vehicles, surface transport policies, construction of highways and roads in promoting an interstate movement of goods.
Harmonisation: CGST and SGST structure.
Marketing of agro products and related issues: The associations of agriculturists and other federations interact with farming cooperatives to streamline local subsidies and formulate marketing policies for selling agro products.
Weights and measures and prevention of duplication of brands: They help the Government in formulation and implementation of uniform policies in weights and measures and prevention of duplication of brands.
Promoting sound infrastructure: They interact with Government to construct roads, ports, electricity, railways, etc.
Labour legislation: They interact. with the Government on regular basis and the issues related to labour laws, retrenchments, compensation, etc. so that the industry can run efficiently, generate employment, and achieve maximum productivity.

Samacheer Kalvi 12th Economics Solutions Chapter 4 Consumption and Investment Functions

Leave a Comment / Class 12 / By Prasanna

Students can Download Economics Chapter 4 Consumption and Investment Functions Questions and Answers, Notes Pdf, Samacheer Kalvi 12th Economics Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Tamilnadu Samacheer Kalvi 12th Economics Solutions Chapter 4 Consumption and Investment Functions

Samacheer Kalvi 12th Economics Consumption and Investment Functions Text Book Back Questions and Answers

Part – A
Multiple Choice Questions.

Question 1.
The average propensity to consume is measured by –
(a) C / Y
(b) C × Y
(c) Y / C
(d) C + Y
Answer:
(a) C / Y

Question 2.
An increase in the marginal propensity to consume will:
(a) Lead to consumption function becoming steeper
(b) Shift the consumption function upwards
(c) Shift the consumption function downwards
(d) Shift savings function upwards
Answer:
(a) Lead to consumption function becoming steeper.

Question 3.
If the Keynesian consumption function is C = 10 + 0.8 Y then, if disposable income is Rs 1000, what is amount of total consumption?
(a) ₹ 0.8
(b) ₹ 800
(c) ₹ 810
(d) ₹ 0.81
Answer:
(c) ₹ 810

Question 4.
If the Keynesian consumption function is C = 10 + 0.8 Y then, when disposable income is Rs 100, what is the marginal propensity to consume?
(a) ₹ 0.8
(b) ₹ 800
(c) ₹ 810
(d) ₹ 0.81
Answer:
(a) ₹ 0.8

Question 5.
If the Keynesian consumption function is C = 10 + 0.8 Y then, and disposable income is ₹ 100, what is the average propensity to consume?
(a) ₹ 0.8
(b) ₹ 800
(c) ₹ 810
(d) ₹ 0.9
Answer:
(d) ₹ 0.9

Question 6.
As national income increases –
(a) The APC falls and gets nearer in value to the MPC.
(b) The APC increases and diverges in value from the MPC.
(c) The APC stays constant
(d) The APC always approaches infinity.
Answer:
(a) The APC falls and gets nearer in value to the MPC.

Question 7.
As increase in consumption at any given level of income is likely to lead –
(a) Higher aggregate demand
(b) An increase in exports
(c) A fall in taxation revenue
(d) A decrease in import spending
Answer:
(a) Higher aggregate demand

Question 8.
Lower interest rates are likely to:
(a) Decrease in consumption
(b) increase cost of borrowing
(c) Encourage saving
(d) increase borrowing and spending
Answer:
(d) increase borrowing and spending

Question 9.
The MPC is equal to:
(a) Total spending / total consumption
(b) Total consumption / total income
(c) Change in consumption / change in income
(d) None of the above
Answer:
(c) Change in consumption / change in income

Question 10.
The relationship between total spending on consumption and the total income is the –
(a) Consumption function
(b) Savings function
(c) Investment function
(d) aggregate demand function
Answer:
(a) Consumption function

Question 11.
The sum of the MPC and MPS is –
(a) 1
(b) 2
(c) 0.1
(d) 1.1
Answer:
(a) 1

Question 12.
As income increases, consumption will –
(a) fall
(b) not change
(c) fluctuate
(d) increase
Answer:
(d) increase

Question 13.
When investment is assumed autonomous the slope of the AD schedule is determined by the –
(a) marginal propensity to invest
(b) disposable income
(c) marginal propensity to consume
(d) average propensity to consume
Answer:
(c) marginal propensity to consume

Question 14.
The multiplier tells us how much changes after a shift in –
(a) Consumption, income
(b) investment, output
(c) savings, investment
(d) output, aggregate demand
Answer:
(d) output, aggregate demand

Question 15.
The multiplier is calculated as –
(a) 1 / (1 – MPC)
(b) 1 / MPS
(c) 1 / MPC
(d) a and b
Answer:
(d) a and b

Question 16.
It the MPC is 0.5, the multiplier is –
(a) 2
(b) 1/2
(c) 0.2
(d) 20
Answer:
(a) 2

Question 17.
In an open economy import ………………………. the value of the multiplier
(a) Reduces
(b) increase
(c) does not change
(d) changes
Answer:
(a) Reduces

Question 18.
According to Keynes, investment is a function of the MEC and –
(a) Demand
(b) Supply
(c) Income
(d) Rate of interest
Answer:
(d) Rate of interest

Question 19.
The term super multiplier was first used by –
(a) J.R.Hicks
(b) R.G.D. Allen
(c) Kahn
(d) Keynes
Answer:
(a) J.R.Hicks

Question 20.
The term MEC was introduced by –
(a) Adam Smith
(b) J.M. Keynes
(c) Ricardo
(d) Malthus
Answer:
(b) J.M. Keynes

Part – B
Answer The Following Questions In One or Two Sentences

Question 21.
What is consumption function?
Answer:
Meaning of Consumption Function:

1. The consumption function or propensity to consume refers to income consumption relationship. It is a “functional relationship between two aggregates viz., total consumption and gross national income.”

2. Symbolically, the relationship is represented as C = f (Y)
Where,
C = Consumption; Y = Income; f = Function

3. Thus the consumption function indicates a functional relationship between C and Y, where C is the dependent variable and Y is the independent variable, i.e., C is determined by Y. This relationship is based on the ceteris paribus (other things being same) assumption, as only income consumption relationship is considered and all possible influences on consumption are held constant.

Question 22.
What do you mean by propensity to consume?
Answer:

2. Symbolically, the relationship is represented as C = f(Y) Where, C = Consumption; Y = Income; f = Function

Question 23.
Define average propensity to consume (APC)?
Answer:
Average Propensity to Consume:

1. The average propensity to consume is the ratio of consumption expenditure to any particular level of income.” Algebraically it may be expressed as under:
Where, C = Consumption; Y = Income
APC = \(\frac{C}{Y}\)
Where, C = Consumption; Y = Income.

Question 24.
Define marginal propensity to consume (MPC)?
Answer:
Marginal Propensity to Consume:

1. The marginal propensity to consume may be defined as the ratio of the change in the consumption to the change in income. Algebraically it may be expressed as under:
MPC = \(\frac { \Delta C }{ \Delta Y } \)
Where, ∆C = Change in Consumption; ∆Y = Change in Income
MPC is positive but less than unity, 0 < \(\frac { \Delta C }{ \Delta Y } \) < 1.

Question 25.
What do you mean by propensity to save?
Answer:

Thus the consumption function measures not only the amount spent on consumption but also the amount saved.
This is because the propensity to save is merely the propensity not to consume.
The 45° line may therefore be regarded as a zero – saving line, and the shape and position of the C curve indicate the division of income between consumption and saving.

Question 26.
Define average propensity to save (APS)?
Answer:
Average Propensity to Save (APS):

The average propensity to save is the ratio of saving to income.
APS is the quotient obtained by dividing the total saving by the total income. In other words, it is the ratio of total savings to total income. It can be expressed algebraically in the form of equation as under
APS = \(\frac{S}{Y}\) Where, S = Saving; Y = Income

Question 27.
Define Marginal Propensity to Save (MPS)?
Answer:
Marginal Propensity to Save (MPS):

1. Marginal Propensity to Save is the ratio of change in saving to a change in income.

2. MPS is obtained by dividing change in savings by change in income. It can be expressed algebraically as MPS = \(\frac { \Delta S }{ \Delta Y } \)
∆S = Change in Saving; ∆Y = Change in Income
Since MPC + MPS = 1
MPS = 1 – MPC and MPC = 1 – MPS.

Question 28.
Define Multiplier?
Answer:

The multiplier is defined as the ratio of the change in national income to change in investment.
If AI stands for increase in investment and AY stands for resultant increase in income, the multiplier K =AY/AI.
Since AY results from AI, the multiplier is called investment multiplier.

Question 29.
Define Accelerator?
Answer:

“The accelerator coefficient is the ratio between induced investment and an initial change in consumption.”
Assuming the expenditure of ₹50 crores on consumption goods, if industries lead to an investment of ₹100 crores in investment goods industries, we can say that the accelerator is 2.
Accelerator = \(\frac { 100 }{ \Delta Y } \) = 2

Part – C
Answer The Following Questions In One Paragraph.

Question 30.
State the propositions of Keynes’s Psychological Law of Consumption?
Answer:
Propositions of the Law:
This law has three propositions:
1. When income increases, consumption expenditure also increases but by a smaller amount. The reason is that as income increases, we wants are satisfied side by side, so that the need to spend more on consumer goods diminishes. So, the consumption expenditure increases with increase in income but less than proportionately.

2. The increased income will be divided in some proportion between consumption expenditure and saving. This follows from the first proposition because when the whole • of increased income is not spent on consumption, the remaining is saved. In this way, consumption and saving move together.

3. Increase in income always leads to an increase in both consumption and saving. This means that increased income is unlikely to lead to fall in either consumption or saving. Thus with increased income both consumption and saving increase.

Question 31.
Differentiate autonomous and induced investment?
Answer:
Autonomous Investment:

Independent
Income inelastic
Welfare motive

Induced Investment:

Planned
Income elastic
Profit Motive

Question 32.
Explain any three subjective and objective factors influencing the consumption function?
Answer:
Subjective Factors:

The motive of precaution: To build up a reserve against unforeseen contingencies. e.g. Accidents, sickness. ,
The motive of foresight: The desire to provide for anticipated future needs. e.g. Old age.
The motive of calculation: The desire to enjoy interest and appreciation. Consumption and Investment Functions.

Objective Factors:
1. Income Distribution:
If there is large disparity between rich and poor, the consumption is low because the rich people have low propensity to consume and high propensity to save.

2. Price level:
Price level plays an important role in determining the consumption function. When the price falls, real income goes up; people will consume more and propensity to save of the
society increases.

3. Wage level:
Wage level plays an important role in determining the consumption function and there is positive relationship between wage and consumption. Consumption expenditure increases with the rise in wages. Similar is the effect with regard to windfall gains.

Question 33.
Mention the differences between accelerator and multiplier effect?
Answer:
Accelerator Effect Multiplier Effect:

1. Accelerator is the numerical value of the relation between an increase in consumption and the resulting increasing in Investment. Multiplier is the ration of the change in national income to change in Investment.

2. Accelerator (β) = \(\frac { \Delta I }{ \Delta C } \)
ΔI = Change in Investment
ΔC = Change in consumption demand Multiplier (K) = \(\frac { \Delta I }{ \Delta C } \)
ΔI = Increase in Investment ΔY = Increase in Income ΔY results from ΔI

3. Accelerator Effects are –

Increase in consumer demand.
Films get close to fill capacity.
Film invest to meet rising demand. Multiplier Effects are

Multiplier Effect:
1. Multiplier is the ration of the change in national income to change in Investment.

2. Multiplier:
Multiplier (K) = \(\frac { \Delta Y }{ \Delta I } \)
ΔI = Increase in Investment
ΔY = Increase in Income
ΔY results from ΔI

Multiplier Effects are:

Positive Multiplier an initial increases is an injection (or a decrease in a leakage) leads to a greater final increase in real GDP.
Negative Multiplier an initial increases in an injection (or an increase in a leakage) leads to a greater final decrease in real GDP.

Question 34.
State the concept of super multiplier?
Answer:
Super Multiplier: (k and β interaction):

The super multiplier is greater than simple multiplier which includes only autonomous investment and no induced investment, while super multiplier includes induced investment.
In order to measure the total effect of initial investment on income, Hicks has combined the k and β mathematically and given it the name of the Super Multiplier.
The super multiplier is worked out by combining both induced consumption and induced investment.

Question 35.
Specify the limitations of the multiplier?
Answer:

There is change in autonomous investment.
There is no induced investment
The marginal propensity to consume is constant.
Consumption is a function of current income.
There are no time lags in the multiplier process.
Consumer goods are available in response to effective demand for them.
There is a closed economy unaffected by foreign influences.
There are no changes in prices.
There is less than full employment level in the economy.

Part – D
Answer The Following Questions In About A Page.

Question 36.
Explain Keynes psychological law of consumption function with diagram?
The three propositions of the law:

Proposition (1):
Income increases by ₹ 60 crores and the increase in consumption is by ₹ 50 crores.

Proposition (2):
The increased income of ₹ 60 crores in each case is divided in some proportion between consumption and saving respectively, (i.e., ₹ 50 crores and ₹ 10 crores).

Proposition (3):
As income increases consumption as well as saving increase. Neither consumption nor saving has fallen. Diagrammatically, the three propositions are explained in figure. Here, income is measured horizontally and consumption and saving are measured on the vertical axis. C is the consumption function curve and 45° line represents income consumption equality.

Proposition (1):
When income increases from 120 to 180 consumption also increases from 120 to 170 but the increase in consumption is less than the increase in income, 10 is saved.

Proposition (2):
When income increases to 180 and 240, it is divided in some proportion between consumption by 170 and 220 and saving by 10 and 20 respectively.

Proposition (3):
Increases in income to 180 and 240 lead to increased consumption 170 and 220 and increased saving 20 and 10 than before. It is clear from the widening area below the C curve and the saving gap between 45° line and C curve.

Question 37.
Briefly explain the subjective and objective factors of consumption function?
Answer:
Subjective Factors:

The motive of precaution: To build up a reserve against unforeseen contingencies. e.g. Accidents, sickness
The motive of foresight: The desire to provide for anticipated future needs, e.g. Old age
The motive of calculation: The desire to enjoy interest and appreciation.
The motive of improvement: The desire to enjoy for improving standard of living.
The motive of financial independence.
The motive of enterprise (desire to do forward trading).
The motive of pride.(desire to bequeath a fortune)
The motive of avarice.(purely miserly instinct)

2. Price level:

Price level plays an important role in determining the consumption function.
When the price falls, real income goes up; people will consume more and propensity to save of the society increases.

3. Wage level:

Wage level plays an important role in determining the consumption function and there is positive relationship between wage and consumption.
Consumption expenditure increases with the rise in wages.
Similar is the effect with regard to windfall gains.

4. Interest rate:

Rate of interest plays an important role in determining the consumption function.
Higher rate of interest will encourage people to save more money and reduces consumption.

5. Fiscal Policy:
When government reduces the tax the disposable income rises and the propensity to consume of community increases.

6. Consumer credit:

The availability of consumer credit at easy installments will encourage households to buy consumer durables like automobiles, fridge, computer.
This pushes up consumption.

7. Demographic factors:

Ceteris paribus, the larger the size of the family, the grater is the consumption.
Besides size of family, stage in family life cycle, place of residence and occupation affect the consumption function.

8. Duesenberry hypothesis:
Duesenberry has made two observations regarding the factors affecting consumption.

The consumption expenditure depends not only on his current income but also past income and standard of living.
Consumption is influenced by demonstration effect. The consumption standards of low income groups are influenced by the consumption standards of high income groups.

9. Windfall Gains or losses:
Unexpected changes in the stock market leading to gains or losses tend to shift the consumption function upward or downward.

Question 38.
Illustrate the working of Multiplier?
Answer:
Working of Multiplier:

Suppose the Government undertakes investment expenditure equal to ₹ 100 crore on some public works, by way of wages, price of materials etc.
Thus income of labourers and suppliers of materials increases by ₹ 100 crore. Suppose the MPC is 0.8 that is 80 %.
A sum of ₹ 80 crores is spent on consumption (A sum of ₹ 20 Crores is saved).
As a result, suppliers of goods get an income of ₹ 80 crores.
They intum spend ₹ 64 crores (80% of ₹ 80 cr).
In this manner consumption expenditure and increase in income act in a chain like maimer.

The final result is ∆Y = 100 + 100 × 4/5 + 100 × [4/5]² + 100 × [4/5]³ or,
∆Y = 100 + 100 × 0.8 + 100 × (0.8)² + 100 × (0.8)³
= 100 + 80 + 64 + 51.2… = 500 .
that is 100 × 1/1 – 4/5
100 × 1/1/5
100 × 5 = ₹ 500 crores
For instance if C = 100 + 0.8Y, I = 100,
Then Y = 100 + 0.8Y + 100
0.2Y = 200
Y = 200/0.2 = 1000 → Point B
If I is increased to 110, then
0.2Y = 210
Y = 210/0.2 = 1050 → Point D
For ₹ 10 increase in I, Y has increased by ₹ 50.
This is due to multiplier effect.
At point A, Y = C = 500
C = 100 + 0.8 (500) = 500; S = 0
At point B, Y = 1000
C = 100 + 0.8 (1000) = 900; S = 100 = I At point D, Y = 1050
C = 100 + 0.8 (1050) = 940; S = 110 = I
When I is increased by 10, Y increases by 50.
This is multiplier effect (K = 5)
K = \(\frac{1}{0.2}\) = 5

Question 39.
Explain the operation of the Accelerator?
Answer:
Operation of the Acceleration Principle:

Let us consider a simple example. The operation of the accelerator may be illustrated as follows.
Let us suppose that in order to produce 1000 consumer goods, 100 machines are required.
Also suppose that working life of a machine is 10 years.
This means that every year 10 machines have to be replaced in order to maintain the constant flow of 1000 consumer goods. This might be called replacement demand.
Suppose that demand for consumer goods rises by 10 percent (i.e. from 1000 to 1100).
This results in increase in demand for 10 more machines.
So that total demand for machines is 20. (10 for replacement and 10 for meeting increased demand).
It may be noted here a 10 percent increase in demand for consumer goods causes a 100 percent increase in demand for machines (from 10 to 20).
So we can conclude even a mild change in demand for consumer goods will lead to wide change in investment.

Diagrammatic illustration:
Operation of Accelerator.

SS is the saving curve. II is the investment curve. At point E₁ the economy is in equilibrium with OY₁ income. Saving and investment are equal at OY₁ Now, investment is increased from OI₂ to OI₄.
This increases income from OY₁ to OY₃, the equilibrium point being E₃ If the increase in investment by I₂ I₄ is purely exogenous, then the increase in income by Y₁ Y₃ would have been due to the multiplier effect.
But in this diagram it is assumed that exogenous investment is only by I, I3 and induced investment is by I₃I₄.
Therefore, increase in income by Y₁ Y₂ is due to the multiplier effect and the increase in income by Y₂ Y₃ is due to the accelerator effect.

Question 40.
What are the differences between MEC and MEI?
Answer:
Marginal Efficiency of Capital (MEC):

It is based on a given supply price for capital.
It represents the rate of return on all successive units of capital without regard to existing capital.
The capital stock is taken on the X axis of diagram.
It is a “stock” concept.
It determines the optimum capital stock in an economy at each level of interest rate.

Marginal Efficiency of Investment (MEI):

It is based on the induced change in the price due to change in the demand for capital.
It shows the rate of return on just those units of capital over and above the existing capital stock.
The amount of investment is taken on the X – axis of diagram.
It is a “flow” concept.
It determines the net investment of the economy at each interest rate given the capital stock.

Samacheer Kalvi 12th Economics Consumption and Investment Functions Additional Questions and Answers

part – A
I. Multiple Choice Questions.

Question 1.
Price level plays an important role in determining the ……………………
(a) Consumption function
(b) Income function
(c) Finance function
(d) Price function
Answer:
(a) Consumption function

Question 2.
The progressive tax system increases the ……………………….. of the people by altering the income distribution in favour of poor?
(a) price level
(b) wage level
(c) propensity to consume
(d) Fiscal policy
Answer:
(c) propensity to consume

Question 3.
…………………….. means purchase of stocks and shares, debentures, government bonds and equities?
(a) Consumption
(b) Investment
(c) Finance
(d) Saving
Answer:
(b) Investment

Question 4.
…………………… is influenced by demonstration effect.
(a) Investment
(b) Interest
(c) Expenditure
(d) Consumption
Answer:
(d) Consumption

Question 5.
Additional investment that is independent of income is called ……………………
(a) Autonomous Investment
(b) Autonomous Consumption
(c) Average Investment
(d) Marginal Investment
Answer:
(a) Autonomous Investment

Question 6.
Induced investment is motivated?
(a) Investment
(b) Capital
(c) Saving
(d) Profit
Answer:
(d) Profit

Question 7.
MEI is the expected rate of return on investment as additional units of ……………………
(a) Saving
(b) Investment
(c) Consumption
(d) Expenditure
Answer:
(b) Investment

Question 8.
Dynamic multiplier is also known as ……………………
(a) Sequence multiplier
(b) Static multiplier
(c) Double multiplier
(d) Single multiplier
Answer:
(a) Sequence multiplier

Question 9.
The combined effect of interaction of multiplier and accelerator is called ……………………
(a) Super accelerator
(b) Super multiplier
(c) Accelerator
(d) Multiplier
Answer:
(b) Super multiplier

Question 10.
The tendency to initiate Superior consumption pattern is called ……………………
(a) Accelerator effect
(b) Multiplier effect
(c) Super Multiplier effect
(d) Demonstration effect
Answer:
(d) Demonstration effect

Question 11.
The multiplier is the reciprocal of one minus ……………………
(a) MPC
(b) MPS
(c) Multiplier
(d) Accelerator
Answer:
(a) MPC

Question 12.
The concept of multiplier was first developed by ……………………
(a) J.M. Keynes
(b) David Ricardo
(c) R.F. Khan
(d) J.B. Say
Answer:
(c) R.F. Khan

Question 13.
…………………… the larger size of the family, the greater is the consumption?
(a) Demographic factors
(b) Income Distribution
(c) Duesenberry hypothesis
(d) Wage level
Answer:
(b) Income Distribution

Question 14.
MPS is the ratio of change in saving to a change in ……………………
(a) profit
(b) money
(c) finance
(d) income
Answer:
(d) income

Question 15.
Consumption function is called the relationship between ……………………….. and Income?
(a) Money
(b) Consumption
(c) Finance
(d) Investment
Answer:
(b) Consumption

Question 16.
Consumer’s surplus is useful to the Finance Minister in formulating ……………………….. policies?
(a) Surplus
(b) Consumption
(c) Taxation
(d) Income
Answer:
(c) Taxation

Question 17.
Consumer surplus is called potential price – ……………………………. price?
(a) real
(b) actual
(c) normal
(d) high
Answer:
(b) actual

Question 18.
Dynamic multiplier is also known as ………………………. Multiplier.
(a) Sequence
(b) Static
(c) Timeless
(d) Logical
Answer:
(a) Sequence

Question 19.
Static Multiplier is otherwise known as …………………………… Multiplier.
(a) Dynamic
(b) Leakage
(c) Simultaneous
(d) Multi effect
Answer:
(c) Simultaneous

Question 20.
The propensity to consume refers to the portion of Income spent on ……………………….
(a) Income
(b) Profit
(c) Expenditure
(d) Consumption
Answer:
(d) Consumption

Question 21.
………………………. redefined it as investment multiplier.
(a) R.K. Khan
(b) David Ricardo
(c) J.M. Keynes
(d) Marshall
Answer:
(c) J.M. Keynes

Question 22.
Accelerator Model was made by ……………………
(a) J.M. Keynes
(b) J.M. Clark
(c) R.F. Khan
(d) Marshall
Answer:
(b) J.M. Clark

Question 23.
The multiplier tells us …………………………. changes after a shift in ……………………
(a) income
(b) investment
(c) aggregate demand
(d) savings
Answer:
(c) aggregate demand

Question 24.
The simple accelerated model was made by J.M. Clark in ……………………
(a) 1915
(b) 1916
(c) 1914
(d) 1917
Answer:
(d) 1917

II. Match the following and choose the correct answer by using codes given below

Question 1.
A. Consumption function – (i) Consmption increased
B. Induced Investment – (ii) Borrowings
C. Income Increases – (iii) Subjective and objective
D. Autonomous consumption – (iv) Profit motive
Codes:
(a) A (iii) B (iv) C (i) D (ii)
(b) A (iv) B (i) C (ii) D (iii)
(c) A (i) B (ii) C (iii) D (iv)
(d) A (ii) B (iii) C (iv) D (i)
Answer:
(a) A (iii) B (iv) C (i) D (ii)

Question 2.
A. MPS – measured – (i) K = 1/MPS
B. Multiplier developed by – (ii) MEC
C. Investment depends on – (iii) ∆S/∆Y
D. Value of multiplier – (iv) R.F. Khan
Codes:
(a) A (i) B (ii) C (iv) D (iii)
(b) A (ii) B (iii) C (i) D (iv)
(c) A (iii) B (iv) C (ii) D (i)
(d) A (iv) B (i) C (iii) D (ii)
Answer:
(c) A (iii) B (iv) C (ii) D (i)

Question 3.
A. Reduced Investment – (i) 1930
B. Keynes employment dependes on – (ii) Highest interest rate
C. Fall in investment – (iii) Zero
D. Long fun autonomous consumption will – (iv) Investment
Codes:
(a) A (i) B (iii) C (iv) D (ii)
(b) A (ii) B (iv) C (i) D (iii)
(c) A (iii) B (i) C (ii) D (iv)
(d) A (iv) B (ii) C (iii) D (i)
Answer:
(b) A (ii) B (iv) C (i) D (iii)

Question 4.
A. MPS – (i) AC/AY
B. MPC – (ii) C/Y
C. APS – (iii) S/Y
D. APC – (iv) AS/AY
Codes:
(a) A (iv) B (i) C (iii) D (ii)
(b) A (i) B (ii) C (iv) D (iii)
(c) A (ii) B (iii) C (i) D (iv)
(d) A (iii) B (iv) C (ii) D (i)
Answer:
(a) A (iv) B (i) C (iii) D (ii)

Question 5.
A. Investment means – (i) Expenditure on capital formation
B. Uses of multiplier – (ii) Consumption forgone
C. Saving is – (iii) Achieve full employment
D. Autonomous investment – (iv) Stocks and shares
Codes:
(a) A (ii) B (i) C (iv) D (iii)
(b) A (iii) B (ii) C (iii) D (iv)
(c) A (iv) B (iii) C (ii) D (i)
(d) A (i) B (iv) C (i) D (ii)
Answer:
(c) A (iv) B (iii) C (ii) D (i)

III. State whether the statements are true or false.

Question 1.
(i) Keynes propounded the fundamental psychological law of consumption.
(ii) J.M. Keynes has divided factors influencing the consumption function.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(a) Both (i) and (ii) are true

Question 2.
(i) The kinds of multiplier is called Tax Multiplier, Employment Multiplier, Foreign trade Multiplier, Investment Multiplier.
(ii) Investment means money collecting.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(d) (i) is false but (ii) is true

Question 3.
(i) The term investment means purchase of stocks and shares, debentures, government bonds and equities.
(ii) The term Investment means expenditure on capital formation.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(c) (i) is true but (ii) is false

Question 4.
(i) Leakages of multiplier is payment only.
(ii) Leakages of multiplier limitation is called full employment situation.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(d) (i) is false but (ii) is true

Question 5.
(i) The types of Investment is called Autonomous Investment, Induced Investment.
(ii) Induced Investment is the expenditure on fixed assets and stocks.

(a) Both (i) and (ii) are true
(b) Both 0) and (if) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(a) Both (i) and (ii) are true

IV. Which of the following is correctly matched:

Question 1.
(a) J.M. Clark – Ceteris Paribus
(b) J.M. Keynes – Psychological law of consumption
(c) R.F. Khan – Accelerator model
(d) Duesenberry – Laissez – faire
Answer:
(b) J.M. Keynes – Psychological law of consumption

Question 2.
(a) Induced Investment – Profit motive
(b) MEC – Autonomous Investment
(c) MEI – Technology
(d) MPC – Accelerator
Answer:
(a) Induced Investment – Profit motive

Question 3.
(a) Dynamic Multiplier – Employment
(b) Static Multiplier – Wealth
(c) Accelerator Model – J.M. Clark
(d) Leakage Multiplier – Investment goods
Answer:
(c) Accelerator Model – J.M. Clark

Question 4.
(a) Afltalion – 1909
(b) Hawtrey – 1914
(c) Bickerdike – 1915
(d) J.M. Clark – 1916
Answer:
(a) Afltalion – 1909

Question 5.
(a) Aggregate Income – C
(b) Consumption expenditure – I_A
(c) Autonomous Investment – Y
(d) Induced Private Investment – I_P
Answer:
(d) Induced Private Investment – I_P

V. Which of the following is not correctly matched

Question 1.
(a) Static multiplier – Simultaneous multiplier
(b) Dynamic multiplier – Sequence multiplier
(c) Leakage multiplier – Timeless multiplier
(d) Kinds of multiplier – Tax multiplier
Answer:
(c) Leakage multiplier – Timeless multiplier

Question 2.
(a) Ratio of the consumption – APC expenditure to Income
(b) Ratio of change in consumption – MPC to change in Income
(c) Ratio of the saving to Income – APS
(d) Ratio of change in saving to change in Income – PSM change in Income
Answer:
(d) Ratio of change in saving to change in Income – PSM change in Income

Question 3.
(a) Demonstration Effect – Superior consumption pattern
(b) Subjective factors – Psychological feeling
(c) Objective factors – Real and Measurable
(d) Super multiplier – Investment demand
Answer:
(d) Super multiplier – Investment demand

Question 4.
(a) Average propensity to consume – C/Y
(b) Marginal propensity to consume – AC/AY
(c) Average propensity to consume – S/Y
(d) Marginal propensity to save – AY/AS
Answer:
(d) Marginal propensity to save – AY/AS

Question 5.
(a) The motive of precaution – Accidents, Sickness
{b) The motive of foresight – Old age
(c) The motive of improvement – Improve standard of living
(d) The motive of calculation – Money collecting
Answer:
(d) The motive of calculation – Money collecting

VI. Pick the odd one out.

Question 1.
(a) ∆C – Change in consumption
(b) ∆Y – Change in expenditure
(c) ∆S – Change in saving 4
(d) ∆Y – Change in income
Answer:
(b) ∆Y – Change in expenditure

Question 2.
(a) APC – Algebraically Propensity to Consume
(b) MPC – Marginal Propensity to Consume
(c) APS – Average Propensity to Consume
(d) MPS – Marginal Propensity to Save
Answer:
(a) APC – Algebraically Propensity to Consume

Question 3.
Keynes’s Law is based on the Assumptions.
(a) Ceteris paribus
(b) Existence of Normal conditions
(c) Existence of a Laissez – Faire
(d) Existence of a Technical attributes
Answer:
(d) Existence of a Technical attributes

Question 4.
Investment means
(a) Purchase of stocks and shares
(b) Debentures
(c) Government bonds and equities
(d) Bank amount
Answer:
(d) Bank amount

Question 5.
MEC – Short Run Factors
(a) Supply for the product
(b) Liquid Assets
(c) Sudden changes in Income
(d) Current rate of Investment
Answer:
(a) Supply for the product

VII. Assertion and Reason.

1. Assertion (A): Keynes Law of propositions – when Income increases, consumption expenditure also increases but by a smaller amount.
Reason (R): Keynes Law of propositions – Increase in Income always lead to an increase in both consumption and saving.

(a) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’
(b) Both ‘A’ and ‘R’ are true but ‘R’ is not the correct explanation to ‘A’
(c) ‘A’ is true but ‘R’ is false
(d) ‘A’ is false but ‘R’ is true
Answer:
(a) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’

Question 2.
Assertion (A): J.M. Keynes has influencing consumption function into subjective factors are the Internal factors related to psychological feelings.
Reason (R): J.M. Keynes has influencing consumption function into objective factors are Internal factors are not measurable.

Question 3.
Assertion (A): Autonomous Investment is the expenditure on capital formation.
Reason (R): Autonomous Investment is Independent of the change in Income, rate of Interest or rate of profit.

Question 4.
Assertion (A): MEC – depends on the Demand yield from a capital asset.
Reason (R): MEC – depends on the Supply price of a capital asset.

Question 5.
Assertion (A): Keynes theory of the Multiplier Assumption is change in autonomous Investment.
Reason (R): Keynes theory of the Multiplier Assumption is no Induced Investment.

(а) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’
(b) Both ‘A’ and ‘R’ are true but ‘R’ is not the correct explanation to ‘A’
(c) ‘A’ is true but ‘R’ is false
(d) ‘A’ is false but ‘R’ is true
Answer:
(а) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’

Part – B
Answer The Following Questions In One or Two Sentences.

Question 1.
Write “Propensity to consume” Equations?
Answer:
(i) The Average Propensity to Consume = \(\frac{c}{y}\)
(ii) The Marginal Propensity to Consume = \(\frac{∆c}{∆y}\)
(iii) The Average Propensity to Save = \(\frac{x}{y}\)
(iv) The Marginal Propensity to Save = \(\frac{∆s}{∆y}\)

Question 2.
Define “Ceteris paribus”?
Answer:
Ceteris paribus (constant extraneous variables):
The other variables such as income distribution, tastes, habits, social customs, price movements, population growth, etc. do not change and consumption depends on income alone.

Question 2.
Define “Laissez-Faire” – Capitalist Economy?
Answer:
Existence of a Laissez – faire Capitalist Economy:
The law operates in a rich capitalist economy where there is no government intervention. People should be free to spend increased income. In the case of regulation of private enterprise and consumption expenditures by the State, the law breaks down.

Question 3.
What do you mean “Windfall Gains” or “Losses”?
Answer:
Windfall Gains or losses:
Unexpected changes in the stock market leading to gains or losses tend to shift the consumption function upward or downward.

Question 4.
Define “Autonomous consumption”?
Answer:
Autonomous Consumption:
Autonomous consumption is the minimum level of consumption or spending that must take place even if a consumer has no disposable income, such as spending for . basic necessities.

Part – C
Answer the Following Questions In One Paragraph.

Question 1.
Explain the Keynes Psychological Law’ of consumption assumptions?
Answer:
Keynes’s Law is based on the following assumptions:
1. Ceteris paribus (constant extraneous variables):
The other variables such as income distribution, tastes, habits, social customs, price movements, population growth, etc. do not change and consumption depends on income alone.

2. Existence of Normal Conditions:

The law holds good under normal conditions.
If, however, the economy is faced with abnormal and extraordinary circumstances like war, revolution or hyperinflation, the law will not operate.
People may spend the whole of increased income on consumption.

3. Existence of a Laissez – faire Capitalist Economy:

The law operates in a rich capitalist economy where there is no government intervention.
People should be free to spend increased income.
In the case of regulation of private enterprise and consumption expenditures by the State, the law breaks down.

Question 2.
Explain the Marginal Efficiency of capital?
Answer:
Marginal Efficiency of Capital:

MEC was first introduced by J.M Keynes in 1936 as an important determinant of autonomous investment.
The MEC is the expected profitability of an additional capital asset.
It may be defined as the highest rate of return over cost expected from the additional unit of capital asset.
Meaning of Marginal Efficiency of Capital (MEC) is the rate of discount which makes the discounted present value of expected income stream equal to the cost of capital.

MEC depends on two factors:

The prospective yield from a capital asset.
The supply price of a capital asset.

Factors Affecting MEC:

Question 3.
Explain the uses of multiplier?
Answer:
Uses of multiplier

Multiplier highlights the importance of investment in income and employment theory
The process throws light on the different stages of trade cycle.
It also helps in bringing the equality between S and I.
It helps in formulating Government policies.
It helps to reduce unemployment and achieve full employment.

Question 4.
Write the Accelerator Assumptions?
Answer:
Assumptions:

Absence of excess capacity in consumer goods industries.
Constant capital – output ratio
Increase in demand is assumed to be permanent
Supply of funds and other inputs is quite elastic
Capital goods are perfectly divisible in any required size.

Question 5.
Write the “Leverage Effect” and Equation Explanation?
Answer:
Leverage Effect:
The combined effect of the multiplier and the accelerator is also called the leverage effect which may lead the economy to very high or low level of income propagation.
Symbolically
Y = C + I_A + I_P
Y = Aggregate income
C = Consumption expenditure
T = autonomous investment; I_P = induced private investment

Part – D
Answer The Following Questions In One Page.

Question 1.
Briefly explain the Leakages of Multiplier?
Answer:
Leakages of multiplier:

The multiplier assumes that those who earn income are likely to spend a proportion of their additional income on consumption.
But in practice, people tend to spend their additional income on other items. Such expenses are known as leakages.

Payment towards past debts:
If a portion of the additional income is used for repayment of old loan, the MPC is reduced and as a result the value of multiplier is cut.

Purchase of existing wealth:

If income is used in purchase of existing wealth such as land, building and shares money is circulated among people and never enters into the consumption stream.
As a result the value of multiplier is affected.

Import of goods and services:

Income spent on imports of goods or services flows out of the country and has little chance to return to income stream in the country.
Thus imports reduce the value of multiplier.

Non availability of consumer goods:

The multiplier theory assumes instantaneous supply of consumer goods following demand.
But there is often a time lag.
During this gap (D > S) inflation is likely to rise.
This reduces the consumption expenditure and there by multiplier value.

Full employment situation:

Under conditions of full employment, resources are almost fully employed.
So, additional investment will lead to inflation only, rather than generation of additional real income.

Question 2.
Explain Marginal Propensity to Consume [MPC] and Multiplier with diagram and Diagrammatic explanation?
Answer:
Marginal propensity to consume and multiplier.
The propensity to consume refers to the portion of income spent on consumption.
The MPC refers to the relation between change in consumption (C) and change in income (Y).

Symbolically MPC = ∆C/∆Y
The value of multiplier depends on MPC
Multiplier (K) = 1/1 – MPC
The multiplier is the reciprocal of one minus marginal propensity to consume.
Since marginal propensity to save is 1 – MPC. (MPC + MPS = 1).
Multiplier is 1/ MPS.
The multiplier is therefore defined as reciprocal of MPS.
Multiplier is inversely related to MPS and directly with MPC.
Numerically if MPC is 0.75, MPS is 0.25 and k is 4.
Using formula k = 1/1 – MPC
1/1 – 0.75 = 1/0.25 = 4
Taking the following values, we can explain the functioning of multiplier.

C = 100 + 0.8 y; 1 = 100 1 = 10
Y = C + I
Y = 100 + 0.8y = 100 + (1000) = 900;
S = 100 = I
After I is raised by 10, now I = 110
Y = 100 + 0.8y + 110
0.2y = 210
Y = \(\frac{210}{0.2}\) = 1050
Here C = 100 = 0.8 (1050) = 940; S = 110 = 1
Diagrammatic Explanation.
At 45° line y = C + S
It implies the variables in axis and axis are equal.
The MPC is assumed to be at 0.8 (C = 100 + 0.8y)
The aggregate demand (C + I) curve intersects 45° line at point E.
The original national income is 500.
(C = 100 + 0.8y = 100 + 0.8 (500) = 500)
When I is 100, y = 1000, C = 900;
S = 100 = I
The new aggregate demand curve is C+F = 100 + 0.8y + 100 + 10
Y = \(\frac{210}{0.2}\) = 1050
C = 940; S = 110 = 1

Question 3.
Explain about Marginal Efficiency of Capital [MEC] short run factors and long run factors?
Answer:
(a) Short – Run Factors

1. Demand for the product:

If the market for a particular good is expected to grow and its costs are likely to fall, the rate of return from investment will be high.
If entrepreneurs expect a fall in demand for goods and a rise in cost, the investment will decline.

2. Liquid assets:

If the entrepreneurs are holding large volume of working capital, they can take advantage of the investment opportunities that come in their way.
The MEC will be high.

3. Sudden changes in income:

The MEC is also influenced by sudden changes in income of the entrepreneurs.
If the business community gets windfall profits, or tax concession the MEC will be high and hence investment in the country will go up.
On the other hand, MEC falls with the decrease in income.

4. Current rate of investment:

Another factor which influences MEC is the current rate of investment in a particular industry.
If in a particular industry, much investment has already taken place and the rate of investment currently going on in that industry is also very large, then the marginal efficiency of capital will be low.

5. Waves of optimism and pessimism:

The marginal efficiency of capital is also affected by waves of optimism and pessimism in the business cycle.
If businessmen are optimistic about future, the MEC will be likely to be high.
During periods of pessimism the MEC is under estimated and so will be low.

(b) Long – Run Factors
The long run factors which influence the marginal efficiency of capital are as follows:

1. Rate of growth of population:

Marginal efficiency of capital is also influenced by the rate of growth of population.
If population is growing at a rapid speed, it is usually believed that the demand of various types of goods will increase.
So a rapid rise in the growth of population will increase the marginal efficiency of capital and a slowing down in its rate of growth will discourage investment and thus reduce marginal efficiency of capital.

2. Technological progress:

If investment and technological development take place in the industry, the prospects of increase in the net yield brightens up.
For example, the development of automobiles in the 20th century has greatly stimulated the rubber industry, the steel and oil industry etc.
So we can say that inventions and technological improvements encourage investment in various projects and increase marginal efficiency of capital.

3. Monetary and Fiscal policies:
Cheap money policy and liberal tax policy pave the way for greater profit margin and so MEC is likely to be high.

4. Political environment:
Political stability, smooth administration, maintenance of law and order help to improve MEC.

5. Resource availability:
Cheap and abundant supply of natural resources, efficient labour and stock of capital enhance the MEC.

Samacheer Kalvi 11th Commerce Solutions Chapter 25 International Business

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Students can Download Commerce Chapter 25 International Business Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 25 International Business

Samacheer Kalvi 11th Commerce International Business Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
Movement of goods, services, intellectual property, human assets, technology and so on among the countries ………………
(a) International Trade
(b) International business
(c) Entrepot Trade
(d) Internal trade
Answer:
(a) International Trade

Question 2.
Goods are imported for purpose of re – export to another country is termed as ………………
(a) Import Trade
(b) Export Trade
(c) Entrepot Trade
(d) International trade
Answer:
(c) Entrepot Trade

Question 3.
Movement of goods, services among the countries ………………
(a) International Trade
(b) International business
(c) Entrepot Trade
(d) Internal trade
Answer:
(b) International business

Question 4.
Selling of goods from home country to foreign country is called ………………
(a) Home Trade
(b) Entrepot Trade
(c) Foreign Trade
(d) Joint Venture
Answer:
(c) Foreign Trade

II. Very Short Answer Questions

Question 1.
What do you mean by international business?
Answer:
International business denotes all those business activities which take place beyond the geographical limits of the country. It involves the international movements of capital personnel, technology, and intellectual property like patents, trademarks, and know-how and copyrights.

Question 2.
What is meant by Export Trade?
Answer:
When the firm of a country sells goods and services to a firm of another country it is called export trade. Export trade indicates the selling of goods and services from the home country to a foreign country.

Question 3.
What is meant by Import Trade?
Answer:
When the business firm of a country purchases goods from the firm of another country it is called import trade. Importing means the purchase of foreign products and bringing them into one’s home country.
Example: Indian Enterprise purchases petroleum products, electrical goods. etc.

Question 4.
What is meant by Entrepot Trade?
Answer:
When the firm of country imports goods for the purpose of exporting the same goods to the firms of some other country with or without making any change in the goods meant for export it is known as entrepot trade.

Question 5.
Give any two reasons for International Business.
Answer:

To avoid uneven distribution of natural resources across the world and specialization attained by certain countries.
To fully utilize the cost benefits.

III. Short Answer Questions

Question 1.
Describe the importance of external trade to an economy.
Answer:
1. Unequal Distribution of Natural Resources:
Countries across the world are not endowed with the natural resources of various types equally and equitably. This uneven distribution of resources worldwide makes it necessary the exchange of goods among the countries through international business.

2. Uneven Availability of Factors of Production:
The availability of various factors of production namely, land, labour, capital and technology for producing goods and services differ among different countries. International business moves the surplus factor in one country over to another country where it is in short supply.

3. Specialisation:
Certain countries or some geographical areas of a certain country specialize in the production of goods and services due to some natural advantages like abundant availability of skilled labour, favourable climatic conditions, availability of natural resources, technical know-how, etc. International business transfers the abundant surplus to other countries that do not have these specialized goods or products.

4. Cost-Benefit
Production cost varies significantly among the countries due to differences in socioeconomic, geographical, demographical, technical, and political environments prevailing therein. This makes the firms engaged in international business import the goods available at lower prices from other countries and exports the goods which bring them better prices to other countries.

Question 2.
What is the necessity for entrepot trade?
Answer:
Entrepot is necessary because of the following reasons:

The country may not have any accessible trade routes connecting the importing country.
The goods imported may require further processing or finishing before exporting, and these facilities may be lacking in the exporting or importing country.
There may not have any bilateral trade agreement between both countries.

Question 3.
What are the limitations of international business?
Answer:
The following are the major limitations of international business.

The parent firm has to make 100 percent equity investments in the foreign subsidiaries. As a result, international business is, not suitable for small and medium-sized companies which have insufficient fund.
The parent company has to bear the entire losses resulting from the failure, of its foreign operations.
International business is subject to greater political risks.

IV. Long Answer Questions

Question 1.
List out the advantages of international trade.
Answer:
Geographical Specialization:
Countries across the world differ significantly in terms of natural resources, capital equipment, manpower, technology and land and so on Some countries are rich in mineral resources hydro-electric power metallic resources, and so on. International business is required to exchange the surplus resources resulting from geographical specialisation for deficit resources in other countries.

Optimum use of Natural Resources:
The international business operates on a simple principle that a country which can produce more efficiently and trade the surplus production with other countries has to procure what it cannot produce more efficiently This enables the countries to optimally utilize the scarce resources available with them.

Economic Development:
International business helps the developing countries greatly in achieving rapid economic development by importing machinery, equipment, technology, talent, and so on. Even the developed countries like Japan, the USA, UK, etc., have achieved remarkable economic progress through the import of raw materials and export of manufactured goods.

Generation of Employment:
International business generates employment opportunities by assisting the expansion and growth of agricultural and industrial activities. It provides direct employment to those people who are hired by export and import firms and generates indirect employment to a number of intermediary firms like, clearing and forwarding agents, indent houses transport organizations, outsourcing agencies, etc.

Higher Standard of Living:
On account of international business, the citizens of the country can buy more varieties of goods and services which cannot be produced cost-effectively within the home country. This exchange of goods and services among the countries enhances the standard of living of people.

Price Equalization:
International business helps to stabilize the prices of various commodities which are fluctuating on a daily basis in the world market, international business prevents violent fluctuations of prices of various commodities and helps maintain prices of various commodities at a stable level in each and every country.

Prospects for Higher Profit:
International business helps the which produce goods in excess to sell them at a relatively higher price to various countries in the international market. This enables them to earn higher profits.

Capacity Utilisation:
International business enables firms across the country to sell their goods and services on a large scale in the international market. As a result, their machinery and equipment are used to their full capacity. In the short very prospect of selling goods in the international market besides selling the goods in home, market keeps the machinery, tools, equipment, and factory fully engaged all through the year.

International Peace:
International business makes countries across the world become inter-dependent while these countries are independent in their functioning. All the factors collectively contribute to maintaining international peace.

Question 2.
Enumerate the disadvantages of international trade.
Answer:
1. Economic Dependence : International trade is more likely to make the country too much dependent on imports from foreign countries. The former may not take any efforts to produce goods and services indigenously to substitute imported goods and thus becoming self sufficient.

2. Inhibition of Growth of Home Industries: International business may discourage the growth of the indigenous industry. Unrestricted imports and severe competition from foreign companies may ruin the home industries altogether.

3. Import of Harmful Goods : International business may lead to import of luxurious goods, spurious goods, dangerous goods, etc. It may harm the well-being of people.

4. Shortage of Essential Goods in Home Country: The export of essential commodities out of the greed of earning more foreign exchange may result in an absolute shortage of these goods at home country and people may have to buy these commodities at an exorbitant price in the local market.

5. Misuse of Natural Resources : Excessive export of scarce natural resources to various countries across the world may lead to faster depletion of the resources in the exporting countries.

6. Political Exploitation : International business may create economic dependence among the countries which may threaten their political independence.

7. Rivalry among the Nations : Acute competition for exports may lead to rivalry among the nations. This may lead to a conflict of interest among the countries and end up in wars among them.

8. Invasion of Culture: International business may result in an invasion of a country’s culture. The younger generation is more likely to imitate foreign culture and buy goods and services beyond their means to gain acceptance in the affluent section of society. This will ruin the conventional lifestyle of the society.

Question 3.
Distinguish between internal and international trade.
Answer:

Samacheer Kalvi 11th Commerce Solutions Chapter 16 Emerging Service Business in India

Leave a Comment / Class 11 / By Bhagya

Students can Download Commerce Chapter 16 Emerging Service Business in India Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 16 Emerging Service Business in India

Samacheer Kalvi 11th Commerce Emerging Service Business in India Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
A continuing relationship which provides a licence privileges do business and provides training, merchandising for a consideration is called …………….
(a) Franchising
(b) Factoring
(c) supply chain management
(d) Exchange
Answer:
(a) Franchising

Question 2.
A condition were a factors agrees to provide complete set of services like financing, debt collection, consultancy is called …………….
(a) Maturity factoring
(b) National factoring
(c) Full service factoring
(d) Recourse factoring
Answer:
(c) Full service factoring

Question 3.
Buying and selling ofgoods through electronic network is known as …………….
(a) E – commerce
(b) Internet
(c) Website
(d) Trade
Answer:
(a) E – commerce

Question 4.
An organization carrying out activities to move goods from producer to consumer is …………….
(a) Transport
(b) Logistics
(c) Channels
(d) Marketing
Answer:
(a) Transport

Question 5.
The role of government in logistics management is through …………….
(a) Legislations
(b) Governance
(c) Transport
(d) Distribution
Answer:
(d) Distribution

Question 6.
The main benefit of Logistics is …………….
(a) productivity
(b) Cost minimisation
(c) Profitability
(d) Storage
Answer:
(b) Cost minimisation

Question 7.
What aims for an effective management response over the longer run …………….
(a) Logistics
(b) Supply Chain Management
(c) Demand
(d) Supply
Answer:
(a) Logistics

Question 8.
The model that identifies alternatives, criteria for decision making and analyse alternatives to arrive at the best choice is …………….
(a) Routing model
(b) Scheduling model
(c) Inventory model
(d) Alternative Analysis
Answer:
(b) Scheduling model

Question 9.
A company under outsourcing transfers activities which are …………….
(a) Core
(b) Non – Core
(c) Business
(d) Non – Business
Answer:
(b) Non – Core

Question 10.
Business units can reduce expenditure by outsourcing front office work like ……………..
(a) Paper work
(b) file work
(c) Billing
(d) manufacture
Answer:
(b) file work

Question 11.
The main benefit of outsourcing is …………….
(a) Productivity
(b) Cost reduction
(c) Skill
(d) Units
Answer:
(b) Cost reduction

Question 12.
Outsourcing job is given to developing countries specifically for …………….
(a) Cheap labour
(b) Land
(c) Capital
(d) Factors
Answer:
(a) Cheap labour

Question 13.
Outsourcing is carried out for the benefit of …………….
(a) Global village
(b) Transport
(c) Factory
(d) Time and money
Answer:
(d) Time and money

II. Very Short Answer Questions

Question 1.
Who is a franchisee?
Answer:
The individual who acquires the right to operate the business or use the trademark of the seller is known as the franchisee.

Question 2.
State two disadvantages of franchising?
Answer:
Franchising fees: The initial franchising fee and the subsequent renewal fee can be very high in the case of successful businesses. From the franchisee’s point of view, this may be a deterrent. Fixed royalty payment: The franchisee has to make payment of royalty to the franchiser on a regular basis. This considerably reduces the income of the franchisee.

Question 3.
Who is a factor?
Answer:
The factor is an agent who buys the accounts receivables (Debtors and Bills Receivables) of a firm and provides finance to a firm to meet its working capital requirements.

Question 4.
Define outsourcing.
Answer:
BPO refers to outsourcing the work which is routine in nature, to an outside agency.

Question 5.
What is the need for outsourcing?
Answer:

To obtain the benefit of specialization
To reduce the cost
To increase profit
To cater to the dynamic demand

Question 6.
State the importance of BPO.
Answer:
BPO means getting contractual services of external companies or group of companies to complete special work or process of a company. For example call centres, data entry etc. This reduces the expenditure by using cheap labour available in developing countries like India, China etc.

Question 7.
What are the benefits of KPO?
Answer:

It helps in the usage of the best skills
It produces ultimate use of knowledge
It helps in finding a solution to a complex problem
It leads to a reduction of expenditure

Question 8.
Define Logistics.
Answer:
Logistics can be viewed as a logical extension of transportation and related areas to achieve an efficient and effective goods distribution system.

Question 9.
What is the need for Logistics?
Answer:
Logistics are needed in the following factors.
The following are the need for logistics:

Development of the systems approach and total cost analysis concepts.
Markets, and logistics policies and practices of suppliers of consumer products, being driven by the large retailers.
Customer service activities continuing to be centralized and consolidated.

Question 10.
Write about the importance of Logistics.
Answer:
Organizations taking proactive managerial attention in coordinating the actors in logistics leads to reduced logistics costs and improved customer service.

Question 11.
What are the types of Logistics Applications?
Answer:

Decision – wise
Actor – wise
Inbound logistics
Outbound logistics

Question 12.
What do you mean by E-commerce?
Answer:
E-Commerce is the process of buying and selling goods and services through electronic networks like the internet. It denotes the external transactions.

III. Short Answer Questions

Question 1.
What are the types of franchising?
Answer:
1. Product/ trade name franchising:
In this type, the franchisee exclusively deals with a manufacture’s product. Examples include Kidzee, French loaf outlets, Bharat Petroleum bunks, Patanjali products, etc. Relationships like Maruti Suzuki with ABT Maruti or Hero Honda bike dealerships may be considered as franchises. However, they but should be considered more as exclusive dealerships with more operational freedom for the dealers.

2. Business format franchising:
When a franchisor awards rights covering all business aspects as a complete called business format franchising. This package includes training, support, and the corporate name. This enables uniformity of products, services, environment across geographical boundaries with a high degree of standardization. Examples are McDonald’s, Pizza Hut. KFC, Hot bread, Titan, Color plus, Zodiac, Lakme beauty parlour.

Question 2.
List the steps in the factoring process.
Answer:

The firm enters into a factoring arrangement with a factor, which is generally a financial institution, for invoice purchasing.
Whenever goods are sold on a credit basis, an invoice is raised and a copy of the same is sent to the factor.
The debt amount due to the firm is transferred to the factor through the assignment and the same is intimated to the customer.

Question 3.
Describe the benefits of Logistics.
Answer:

Logistics reduce overall logistics costs
It avoids the distribution of infrastructure investment.
It helps in avoiding systems investments.
It helps in sharing freight costs.
It helps in reducing liability in freight operations.
It leads to quick access to new markets.

Question 4.
Explain the points of differences between Logistics and Supply Chain Management.
Answer:
Logistics:
Logistics Management deals with the efficient management of a static gap between demand and supply.

Supply Chain Management:
Supply Chain Management tries to identify the dynamic nature of the value creation itself such as responsiveness, quality, and design. Hence, it aims for an effective management response over the longer run.

Question 5.
What is the impact of e-commerce on buyers?
Answer:

Buyers could have global access to information about a variety of products and services available in the market
They could buy the products/services round the clock from anywhere in the world.
The prices of products bought through e-commerce tend to be relatively lower than those purchased physically in the conventional shops due to offers, discounts, etc.
Electronic and software products could be downloaded immediately after purchase through e-commerce mode.
Customers could participate in e-auction which is one of the facets of e-commerce and get a contract in a free and fair manner.
Individuals could sell their used products through e-commerce mode with relative ease.
Buyers can bargain and negotiate better terms and conditions with respect to buying knowledge products.

IV. Long Answer Questions

Question 1.
Enumerate the characteristics of franchising.
Answer:
Meaning: The practice of the right to use a firm’s business model and brand for a prescribed period of time.

A franchise relationship is based on an agreement which lays down the terms and conditions of this relationship.
The term of the franchise may be for 5 years or more. The franchise agreement may be renewed with the mutual consent of the parties.
The franchisee gives an undertaking not to carry any other competing business during the term of the franchise, and the franchiser gives an undertaking not to terminate the franchise agreement before its expiry except under situations that may justify the termination of the franchise agreement.
The franchisee agrees to pay specified royalty to the franchiser, as per the terms of the franchise agreement.
Franchise means selling the same product and maintaining a similar type of shop decor (i.e. style of interior decoration) for which the franchiser provides assistance to the franchisee in organizing, merchandising, and management. The franchiser virtually sets up the business for the franchisee.
The franchisee is supposed to follow the parent, company’s policies regarding the mode of business operations, as per clauses in the franchise agreement.
Franchisers may give training to personnel working in the franchisee’s organization.

Question 2.
Elucidate the features of factoring.
Answer:

Maintenance of book – debts: A factor takes the responsibility of maintaining the accounts of debtors of a business institution.
Credit coverage: The factor accepts the risk burden of loss of bad debts leaving the seller to concentrate on his core business
Cash advances: Around eighty percent of the total amount of accounts receivables is paid, as advance cash to the client.
Collection service: Issuing reminders, receiving part payments, collection of cheques from part of the factoring service.
Advice to clients: From the past history of debtors, the factor is able to provide advice regarding the creditworthiness of customers, perception of customers about the products of the client, etc.

Question 3.
Describe the benefits of Outsourcing.
Answer:

Focusing on Core Activities: Companies can focus on their core competence, a few areas where the company has a distinct capability. The rest of the activities (noncore) can be outsourced to outside agencies.
To Fill up Economic Development Outsourcing stimulates entrepreneurship, encourages employment opportunities, expands exports, enables tremendous growth of the economy.
Encourages Employment Opportunities: Companies that are outsourcing their noncore activities provide chances for other small business units to take up the activities. This paves way for more job opportunities and new employment avenues.
Reduction in Investment: Companies through outsourcing avail the services of outsiders which in turn reduces the investment requirements. The amount so available can be utilized productively and this increases the profits.
Quest for Excellence: Outsourcing enables the firms to pursue excellence in two ways namely excelling themselves in the activities they do and excel outsiders by extending their capabilities through contracting out.

Question 4.
Explain the points of differences between BPO and KPO.
Answer:
BPQ:

BPO means getting contractual services of external companies or groups of companies to complete the special work or process of a company.
For example call centres, data entry, etc. This reduces the expenditure by using cheap labour available in developing countries like India, China, etc.
To focus on key functions.
The benefit of specialization/efficiency.
Cost-cutting.

KPO:

KPO refers to the outsourcing of Knowledge-based Processes. It means obtaining high-end knowledge work from outside the organization in order to run the business successfully and in a cost-effective manner.
In short KPO firms get knowledge related, information related, work done from the outside firm and it involves high-value work carried highly skilled staff.
Usage of best skills.
The ultimate use of knowledge.
Finding a solution to a complex problem.

Question 5.
Write a note on e-commerce models.
Answer:
Business to Customers (B 2 C):
This is the fastest-growing segment in e-commerce spare. Under this model, business concern sells directly to consumers.

Business to Business (B 2 B):
Under the model, business concerns transact with one another through the internet. For instance, Snapdeal, Flipkart, Alibaba, Indiamart, Trade India. Com etc.

Consumer to Consumer (C 2 C):
Under this model, customers sell directly to other customers through online classified advertisement or through auction or through mobile or through market places. Example. Indian ventures in C 2 C are Kraftly App (buying and selling anythings) which deals in handmade products of a wide range. Once again store. Com is a website that buys pre-owned women’s fashion products. Other players are quikr, olx, eBay etc.

Customer to Business ( C 2 B):
This model is reverse to the auction model. Products like automobiles, electronic items furniture, and similar product are traded by customers through websites. Example Naukri.com and Monster.com are examples of Indian companies operating in this domain

Business to Government ( B 2 G):
This model envisages selling products and services by the business consumers to Government organizations. For instance, TCS operates the passport application process for the Government of India as a part off-line process.

Samacheer Kalvi 12th Commerce Emerging Service Business in India Additional Questions and Answers

I. Choose the Correct Answer:

Question 1.
There are …………….. parties to a franchising agreement.
(a) two
(b) Three
(c) Four
(d) Five
Answer:
(a) two

Question 2.
There are …………….. types of franchising primarily.
(a) One
(b) Two
(c) Three
(d) Four
Answer:
(b) Two

Question 3.
Factoring means ……………..
(a) to make or do
(b) to work
(c) for credit
(d) for debit
Answer:
(a) to make or do

Question 4.
…………….. focuses on profit maximization rather than cost-minimizing.
(a) SMC
(b) LM
(c) Transportation
(d) GST
Answer:
(a) SMC

Question 5.
Recently a new type of business in the service sector is called ……………..
(a) BPO
(b) core
(c) non – core
(d) gardening
Answer:
(a) BPO

Question 6.
Business to Business (B2B) ……………..
(a) Snapdeal
(b) Monster.com
(c) TCS
(d) ebay
Answer:
(a) Snapdeal

Question 7.
Customer to Business (C2B) ……………..
(a) Flipkart
(b) Indiamart
(c) Olx
(d) Naukri.com
Answer:
(d) Naukri.com

II. Very Short Answer Questions

Question 1.
What is E-Business?
Answer:
E-Business is a broader term which includes an internal and external transaction of an organization across the internet.

Question 2.
What do you mean by Business to Customers (B2C)?
Answer:
This is a faster-growing segment in e-commerce spare. Under this model, business concern sells directly to customers.

Question 3.
Mention any two advantages of franchising.
Answer:

Reduces risk
Business expansion.

III. Short Answer Questions

Question 1.
What is the impact of e-commerce on vendors?
Answer:

Vendors could have wider access to customers across the globe.
This helps minimize the cost of operating business due to the direct distribution of goods to end consumers thanks to the minimum invention of intermediaries.
The vendor could interact with multiple buyers and sellers.

For Future Learning

Question a.
You are a small scale manufacturer of ignition coils for automobiles, located near Ranipet. Explain how will you avail of financial credits through factoring if you get orders from

a. Ford India, Chennai
b. Maruti Suzuki, Gurgaon
c. Kun Hyundai, Seoul

Answer:
a. I can show the sources of business to get credit.

b. Maruti Suzuki, Gurgaon

To identify the activities involved in the movement of goods – Trade
To analyze the benefits of Logistics – Transport
To evaluate the areas which need more focus relating to Logistics – Kinds of transport
To understand critically and analyze the impact of Logistics on Profitability – To reduce cost and improve customer service.

c. Kun Hyundai, Seoul

To identify the core activities of any business – Companies can focus on their core competence.
To analyze the benefits of Outsourcing non – core items – Outsource to outside agents.
To evaluate the areas which need KPO – KPO firm get knowledge related, information related work done from an outside firm.
To understand critically and analyze the impact of call centers

Samacheer Kalvi 11th Commerce Solutions Chapter 23 Channels of Distribution

Leave a Comment / Class 11 / By Bhagya

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Samacheer Kalvi 11th Commerce Solutions Chapter 23 Channels of Distribution

Samacheer Kalvi 11th Commerce Channels of Distribution Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
Trade middleman who acts as a link between wholesaler and customers refers to a ……………..
(a) Producer
(b) Broker
(c) Retailer
(d) Customer
Answer:
(c) Retailer

Question 2.
Who is the first middleman in the channel of distribution?
(a) Wholesaler
(b) Producer
(c) Retailer
(d) Customer
Answer:
(a) Wholesaler

Question 3.
…………….. buy the goods from the producer and sell it to the retailers.
(a) Manufacturer
(b) Wholesaler
(c) Retailer
(d) Consumers
Answer:
(b) Wholesaler

Question 4.
………………. are agents who merely bring the buyer and the seller into contact.
(a) Broker
(b) Commission agent
(c) Selling agent
(d) Stockist
Answer:
(a) Broker

Question 5.
Merchant middlemen can be classified into …………….. categories.
(a) Three
(b) Two
(c) Five
(d) Four
Answer:
(b) Two

Question 6.
Wholesalers deal in …………….. quantity of goods.
(a) Small
(b) Large
(c) Medium
(d) Limited
Answer:
(b) Large

Question 7.
A is a mercantile agent to whom goods are entrusted for sale by a principal and takes physical possession of the goods, but does not obtain ownership.
(a) Broker
(b) Factor
(c) Warehouse – keeper
(d) Commission agent
Answer:
(b) Factor

II. Very Short Answer Questions

Question 1.
Who is a middleman?
Answer:
Middlemen refer to all those who are in the link between the primary producer and the ultimate consumer in the exchange of goods and services.

Question 2.
Define Wholesaler.
Answer:
According to Cundiff and Still “wholesaler buys from the producer and sells merchandise to the retailers and other merchants and not to the consumers.

Question 3.
Define Retailer.
Answer:
According to Cundiff and Still “a retailer is a merchant or occasionally an agent whose main business is selling directly to the ultimate consumers”.

Question 4.
Who is a broker?
Answer:
A Broker is one who bargains for another and receives a commission for his service. He is paid ‘brokerage’ for his services. He brings the buyer and the seller to the negotiating process and arranges for finalising contracts between them.

Question 5.
What are the classifications of the merchant middlemen?
Answer:
Merchant middlemen can be classified into wholesalers and retailers.

Question 6.
Who are the mercantile agents?
Answer:
Mercantile Agents are also called functional middlemen. A businessman appoints a person to buy and sell goods on his behalf and gives him the right to borrow money on the security of goods. He is known as a mercantile agent.

III. Short Answer Questions

Question 1.
What do you understand by channels of distribution?
Answer:
It is the path traced in the direct or indirect transfer of title to a product as it moves from the producer to ultimate consumer.

Question 2.
Who is a factor?
Answer:
A factor is a mercantile agent to whom goods are entrusted for sale by a principal. He takes physical possession of the goods, though he does not obtain ownership of the goods. A factor sells goods in his own name without revealing the name of his principal.

Question 3.
Explain the types of mercantile agents.
Answer:
Brokers, Factors, Commission Agents, Del- credere Agents; Auctioneers, and Warehouse keepers are the types of mercantile middlemen.

Question 4.
Explain any three characteristics of wholesalers.
Answer:

Wholesalers buy goods directly from producers or manufacturers.
Wholesalers buy goods in large quantities and sell in relatively smaller quantities.
Wholesalers sell different varieties of a particular variety of products.

Question 5.
What are the services rendered by the wholesalers to the manufacturers?
Answer:
Services to Producers or Manufacturers
Economies in Large Scale:
A wholesaler buys goods in bulk and, thereby, enables the producers to produce goods on a large scale.

Assistance in Distribution:
Wholesalers collect orders from a large number of retailers scattered over a wide area and buy goods in bulk from producers. He enables producers to reach customers scattered over different parts of the country by distributing goods through retailers located in different areas. Therefore producer can concentrate only on production.

Warehousing Facility:
A wholesaler holds a large stock of goods in his private warehouse or in a rented warehouse. In this way he relieves the manufacturer from the function of warehousing.

Forecasting of Demand:
A wholesaler collects information from retailers about the nature and extent of demand and passes it onto the producers and enables them to produce goods according to the needs, tastes, and fashions prevailing in the market.

Publicity of Goods:
Often wholesalers launch an advertising campaigns to boost the demand for the goods. Producers get the benefit of such publicity and thus enabled to spend less on advertising.

IV. Long Answer Questions

Question 1.
What are the characteristics of retailers?
Answer:
Following are the characteristics of retail traders:

The retailer generally involves dealing in a variety of items. A retailer makes purchases from producers or wholesalers in bulk for sale to the end consumers in small quantities.
Retail trade is normally carried on in or near the main market area.
Generally, retailers involve buying on credit from wholesalers and selling for cash to consumers.
A retailer has indirect relation with the manufacturer (through wholesalers) but a direct link with the consumers.

Question 2.
What are the functions of Wholesalers?
Answer:
Following are the functions of wholesalers:

1. Collection of Goods:
Wholesaler collects the goods from manufacturers or producers in bulk.

2. Storage of Goods:
Wholesaler collects and stores them safely in warehouses, till they are sold out. Perishable goods like fruits, vegetables, etc. are stored in a cold storage facility.

3. Distribution:
A wholesaler sells goods to different retailers. Thus he performs the function of the distribution.

4. Financing:
Wholesalers provide financial support to producers and manufacturers by providing money in advance to them. He also sells goods to retailers on credit. Thus, at both ends wholesaler acts as a financier.

5. Risk Taking:
A wholesaler buys finished goods from the producer and keeps them in the warehouses till the time they are sold and assumes the risk arising from price, spoilage of goods, and changes in demand.

6. Grading Packing and Packaging:
Wholesaler classifies the goods into different categories. He grades the goods on the basis of quality, size and weight etc. He also undertakes packaging of goods and also performs the function of branding.

7. Providing Information:
Wholesalers provide valuable information to retailers and producers. The retailers are informed about the quality and type of products available in the market for sale. The producers are informed about the changes in taste and fashions of consumers by wholesalers so that they may produce the goods on the basis of tastes and preferences of customers.

8. Transportation:
A wholesaler arranges for the transport of goods from producers to his warehouse and from the warehouse to retailer. Many wholesalers maintain their own trucks, carry goods in bulk, and add place utility to the goods.

Question 3.
What are the functions of Retailers?
Answer:

Buying: A retailer buys a wide variety of goods from different wholesalers after estimating customer’s demand.
Storage: A retailer maintains a ready stock of goods and displays them in the shop.
Selling: The retailer sells the goods in small quantities according to the demand taste and preference of consumers.
Grading and Packing: The retailer grades the goods which are not graded by manufacturers and wholesalers.
Risk – bearing: A retailer always keeps stock of goods in anticipation of demand and bears the risk of loss due to fire, theft, spoilage, price fluctuations, etc.
Transportation: Retailers often carry goods from manufacturers to their retail outlets.
Financing: Some retailers grant credit facilities to their customers and provide the facility of return or exchange of goods.

Question 4.
Explain the services rendered by wholesalers to retailers.
Answer:
The following are the Services rendered by wholesalers to Retailers
Financial Assistance:
Wholesalers provide financial assistance to retailers by selling goods on credit. This is done by allowing credit to retailers purchasing goods from them and makes payments to them after receiving money from their customers. This helps retailers to manage their business with a small amount of working capital.

Meeting the Requirements:
Due to limited capital and lack of space in his facility a retailer cannot hold a large variety of products. The wholesaler removes this difficulty by selling goods as and when the retailer requires them.

Introduction of New Products:
Wholesalers bring new products and their uses to the notice of retailers. Thus retailers get knowledge about innovative products and innovative features.

Price Stability:
Wholesalers reduce price fluctuations by adjusting supply and demand and save the retailers from loss arising from price fluctuations.

Economy in Transport:
A wholesaler often delivers goods at the doorsteps of retailers and save their time and cost of transport.

Regular Supply:
Wholesalers keep a large stock of varieties of goods and provide a regular supply of goods as per the retailer’s need. Retailers can purchase as much as they like, from time to time, and need not maintain a large stock of goods.

Question 5.
What are the services rendered by retailers to wholesalers?
Answer:

Help in Distribution Retailers relieves the manufacturers and wholesalers of the burden of collecting and executing a large number of small orders from various consumers.
Market Information Retailer supply valuable information to wholesalers about changes in tastes, preferences, fashion, etc. of consumers
Large Scale Operation The manufacturers and wholesalers are freed from the trouble of making individual sales to consumers in small quantities.
Help in Promotion Retailers participates in the promotional activities carried by manufacturers and wholesalers such as short time offers, coupons, free gifts, sales contests, etc.
Personal Attention The retailer is able to provide more personal attention to his customers than the wholesaler is, He gives special services on the spot when the articles require minor repairs.

Question 6.
Explain the services rendered to consumers by Retailers.
Answer:
A retailer provides the following services to consumers.
Regular Supply of Goods:
Retailers maintain ready stock of various products of different manufacturers for sale to consumers. This enables the buyers to buy products as and when needed.

New Products Information:
The retailers provide important information about the new arrival of products through their personal. Selling efforts and effective display of products.

Credit Facilities:
Sometimes retailers provide credit facilities to their customers and enable them to increase their level of consumption.

Wide Selection:
Retailers generally keep stock of a variety of products of different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.

Miscellaneous Services:

Retailers provide free door delivery services to the customers.
They provide after-sale service to customers.
They allow cash discounts on their sales.

Question 7.
What are the factors affecting a channel of distribution?
Answer:
The factors affecting a channel of distribution are as follows:

Product Characteristics : Seasonal products are distributed through less layer of middlemen. Non standardized products that are made according to customer specifications may be delivered directly.
Market Characteristics: The size of the market for the goods is a major factor while selecting the route for the distribution of products.
Number of Consumers: Large purchases made by few consumers require centralized distribution.
Middlemen factor : Middlemen who are experienced and have produced more sales are wanted by all producers. Long channel naturally increases the cost and price of the product.
The capacity of the Manufacturer: A financially strong producer may select a high technology oriented channel which will reduce cost in the long run.
Cost and Time Involved in the Channel of Distribution: The channel cost should go along with the quality of service provided by middlemen.
Services Required along with the Product: Machinery or equipment which need to be installed and demonstrated should be sold with the shorter channel.
Life Cycle of the Product: An established product can select an ordinary channel. But a new product entering into the market should be carefully promoted by experienced middlemen.

Case Study

A Rama industry was established to manufacturer fashion shoes. Since they were new in the market, they decided to sell their product through wholesalers. They appointed one wholesaler in each district and promised them verbally that they will remain the exclusive wholesalers in the area. After three years during one of the review meetings the sales manager informed that if company sells directly to retailers, they will be able to offer competitive prices, which will increase sales volume and eventually profits. He was directly supporting elimination of wholesalers.
a. Should the company follow the sales manager’s suggestion and start a direct business with retailers?
b. What values would the company ignore if they – pass wholesalers to earn an extra profit?
Answer:
Question a.
No, I don’t think that company should follow the sales manager’s suggestion and start a direct business with retailers, because it is the wholesalers who have put in all the effort to establish a sales network and prepared a market for a new product. The company has though verbally promised wholesalers the exclusivity to sell, so it may not send good signals about the company in the market. The wholesalers may sell the competitors’ products more aggressively, which may affect the company’s sales adversely.

Question b.
Values ignored are:

Mutual trust
Integrity
Importance to relationships

Samacheer Kalvi 12th Economics Solutions Chapter 6 Banking

Leave a Comment / Class 12 / By Prasanna

Students can Download Economics Chapter 6 Banking Questions and Answers, Notes Banking Pdf, Samacheer Kalvi 12th Economics Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Tamilnadu Samacheer Kalvi 12th Economics Solutions Chapter 6 Banking

Samacheer Kalvi 12th Economics Banking Text Book Back Questions and Answers

Part – A
Multiple Choice Questions.

Question 1.
A Bank is a …………………………
(a) Financial institution
(b) Corporate
(c) An Industry
(d) Service institutions
Answer:
(a) Financial institution

Question 2.
A Commercial Bank is an institution that provides services …………………………
(a) Accepting deposits
(b) Providing loans
(c) Both a and b
(d) None of the above
Answer:
(c) Both a and b

Question 3.
The Functions of commercial banks are broadly classified into …………………………
(a) Primary Functions
(b) Secondary functions
(c) Other functions
(d) a, b, and c
Answer:
(d) a, b, and c

Question 4.
Bank credit refers to …………………………
(a) Bank Loans
(b) Advances
(c) Bank loans and advances
(d) Borrowings
Answer:
(c) Bank loans and advances

Question 5.
Credit creation means …………………………
(a) Multiplication of loans and advances
(b) Revenue
(c) Expenditure
(d) Debt
Answer:
(a) Multiplication of loans and advances

Question 6.
NBFI does not have …………………………
(a) Banking license
(b) Government approval
(c) Money ministry approval
Answer:
(a) Banking license

Question 7.
Central bank is …………………………….. authority of any country.
(a) Monetary
(b) Fiscal
(c) Wage
(d) National Income
Answer:
(a) Monetary

Question 8.
Who will act as the banker to the Government of India?
(a) SBI
(b) NABARD
(c) ICICI
(d) RBI
Answer:
(d) RBI

Question 9.
Lender of the last resort is one of the functions of …………………………
(a) Central Bank
(b) Commercial banks
(c) Land Development Banks
(d) Co – operative banks
Answer:
(a) Central Bank

Question 10.
Bank Rate means …………………………
(a) Re – discounting the first class securities
(b) Interest rate
(c) Exchange rate
(d) Growth rate
Answer:
(a) Re – discounting the first class securities

Question 11.
Repo Rate means …………………………
(a) Rate at which the Commercial Banks are willing to lend to RBI
(b) Rate at which the RBI is willing to lend to commercial banks
(c) Exchange rate of the foreign bank
(d) Growth rate of the economy
Answer:
(b) Rate at which the RBI is willing to lend to commercial banks

Question 12.
Moral suasion refers …………………………
(a) Optimization
(b) Maximization
(c) Persuasion
(d) Minimization
Answer:
(c) Persuasion

Question 13.
ARDC started functioning from …………………………
(a) June 3, 1963
(b) July 3, 1963
(c) June 1, 1963
(d) July 1, 1963
Answer:
(d) July 1, 1963

Question 14.
NABARD was set up in …………………………
(a) July 1962
(b) July 1972
(c) July 1982
(d) July 1992
Answer:
(c) July 1982

Question 15.
EXIM bank was established in …………………………
(a) June 1982
(b) April 1982
(c) May 1982
(d) March 1982
Answer:
(d) March 1982

Question 16.
The State Financial Corporation Act was passed by …………………………
(a) Government of India
(b) Government of Tamilnadu
(c) Government of Union Territories
(d) Local Government.
Answer:
(a) Government of India

Question 17.
Monetary policy is formulated by …………………………
(a) Co – operative banks
(b) Commercial banks
(c) Central Bank
(d) Foreign banks
Answer:
(c) Central Bank

Question 18.
Online Banking is also known as …………………………
(a) E – Banking
(b) Internet Banking
(c) RTGS
(d) NEFT
Answer:
(b) Internet Banking

Question 19.
Expansions of ATM.
(a) Automated Teller Machine
(b) Adjustment Teller Machine
(c) Automatic Teller mechanism
(d) Any Time Money
Answer:
(a) Automated Teller Machine

Question 20.
2016 Demonetization of currency includes denominations of …………………………
(a) ₹ 500 and ₹ 1000
(b) ₹ 1000 and ₹ 2000
(c) ₹ 200 and ₹ 500
(d) All the above
Answer:
(a) ₹ 500 and ₹ 1000

Part – B
Answer The Following Questions In One or Two Sentences.

Question 21.
Define Commercial banks?
Answer:
Commercial bank refers to a bank, or a division of a large bank, which more specifically deals with deposit and loan services provided to corporations or large/middle-sized business – as opposed to individual members of the public/small business.

Question 22.
What is credit creation?
Answer:

Credit Creation means the multiplication of loans and advances.
Commercial banks receive deposits from the public and use these deposits to give loans.
However, loans offered are many times more than the deposits received by banks.
This function of banks is known as ‘Credit Creation’.

Question 23.
Define Central bank?
Answer:

A central bank, reserve bank, or monetary authority is an institution that manages a state’s currency, money supply, and interest rates.
Central banks also usually oversee the commercial banking system of their respective countries.

Question 24.
Distinguish between CRR and SLR?
Answer:
CRR:

The Central Bank controls credit by changing the Cash Reserves Ratio.
Commercial Banks have excessive cash reserves on the basis of which they are creating too much of credit, this will be harmful for the larger interest of the economy.
So it will raise the cash reserve ratio which the Commercial Banks are required to maintain with the Central Bank.

SLR:

Statutory Liquidity Ratio (SLR) is the amount which a bank has to maintain in the form of cash, gold or approved securities.
The quantum is specified as some percentage of the total demand and time liabilities.
The liabilities of the bank which are payable on demand anytime, and those liabilities which are accruing in one month’s time due to maturity.

Question 25.
Write the meaning of Open market operations?
Answer:

In narrow sense, the Central Bank starts the purchase and sale of Government securities in the money market.
In Broad Sense, the Central Bank purchases and sells not only Government securities but also other proper eligible securities like bills and securities of private concerns.
When the banks and the private individuals purchase these securities they have to make payments for these securities to the Central Bank.

Question 26.
What is rationing of credit?
Answer:

This is the oldest method of credit control. Rationing of credit as an instrument of credit control was first used by the Bank of England by the end of the 18th Century.
It aims to control and regulate the purposes for which credit is granted by commercial banks.
It is generally of two types.

Question 27.
Mention the functions of agriculture credit department?
Answer:
Functions of Agriculture Credit Department:

To maintain an expert staff to study all questions on agricultural credit;
To provide expert advice to Central and State Government, State Co – operative Banks and other banking activities.
To finance the rural sector through eligible institutions engaged in the business of agricultural credit and to co-ordinate their activities.

Part – C
Answer The Following Questions In One Paragraph.

Question 28.
Write the mechanism of credit creation by commercial banks?
Answer:
Mechanism / Technique of Credit Creation by Commercial Banks:

Bank credit refers to bank loans and advances.
Money is said to be created when the banks, through their lending activities, make a net addition to the total supply of money in the economy.
Money is said to be destroyed when the loans are repaid by the borrowers to the banks and consequently the credit already created by the banks is wiped out in the process.
Banks have the power to expand or contract demand deposits and they exercise this power through granting more or less loans and advances and acquiring other assets.
This power of commercial bank to create deposits through expanding their loans and advances is known as credit creation.

Question 29.
Give a brief note on NBFI?
Answer:
Non – Banking Financial Institution (NBFI):

1. A non – banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by the central bank.

2. The NBFIs do not carry on pure banking business, but they will carry on other financial transactions. They receive deposits and give loans. They mobilize people’s savings and use the funds to finance expenditure on investment activities. In short, they are institutions which undertake borrowing and lending. They operate in both the money and the capital markets.

3. NBFIs can be broadly classified into two categories. Viz.., (1) Stock Exchange; and (2) Other Financial institutions. Under the latter category comes Finance Companies, Finance Corporations, ChitFunds, Building Societies, Issue Houses, Investment Trusts and Unit Trusts and Insurance Companies.

Question 30.
Bring out the methods of credit control?
Answer:
Methods of Credit Control:
I. Quantitative or General Methods:

1. Bank Rate Policy:
The bank rate is the rate at which the Central Bank of a country is prepared to re – discount the first class securities.

2. Open Market Operations:

In narrow sense, the Central Bank starts the purchase and sale of Government securities in the money market.
In Broad Sense, the Central Bank purchases and sells not only Government securities but also other proper eligible securities like bills and securities of private concerns.

3. Variable Reserve Ratio:
(I) Cash Reserves Ratio:

Under this system the Central Bank controls credit by changing the Cash Reserves Ratio.
For example, if the Commercial Banks have excessive cash reserves on the basis of which they are creating too much of credit,this will be harmful for the larger interest of the economy.
So it will raise the cash reserve ratio which the Commercial Banks are required to maintain with the Central Bank.

(II) Statutory Liquidity Ratio:

Statutory Liquidity Ratio (SLR) is the amount which a bank has to maintain securities.
The quantum is specified as some percentage of the total demand and time liabilities (i.ethe liabilities of the bank which are payable on demand anytime, and those liabilities which are accruing in one month’s time due to maturity) of a bank.

Question 31.
What are the functions of NABARD?
Answer:
Functions of NABARD:
NABARD has inherited its apex role from RBI i.e, it is performing all the functions performed
by RBI with regard to agricultural credit.

1. NABARD acts as a refinancing institution for all kinds of production and investment credit to agriculture, small-scale industries, cottage and village industries, handicrafts and rural crafts and real artisans and other allied economic activities with a view to promoting integrated rural development.

2. NABARD gives long-term loans (upto 20 Years) to State Government to enable them to subscribe to the share capital of co – operative credit societies.

3. NABARD gives long-term loans to any institution approved by the Central Government or contribute to the share capital or invests in securities of any institution concerned with agriculture and rural development.

4. NABARD has the responsibility of co – ordinating the activities of Central and State Governments, the Planning Commission (now NITI Aayog) and other all India and State level institutions entrusted with the development of small scale industries, village and cottage industries, rural crafts, industries in the tiny and decentralized sectors, etc.

5. It maintains a Research and Development Fund to promote research in agriculture and rural development

Question 32.
Specify the functions of IFCI?
Answer:

Long – term loans; both in rupees and foreign currencies.
Underwriting of equity, preference and debenture issues.
Subscribing to equity, preference and debenture issues.
Guaranteeing the deferred payments in respect of machinery imported from abroad or purchased in India; and
Guaranteeing of loans raised in foreign currency from foreign financial institutions.

Question 33.
Distinguish between money market and capital market?
Answer:
Money Market:

Money market is the mechanism through which short term funds are loaned and. borrowed. It designates financial institutions which handle the purchase, sale and transfer of short term credit instruments.
Commercial banks, acceptance houses, Non Banking Financial Institutions and the Central Bank are the institutions catering to the requirements of short term funds in the money Market.

Capital Market:

Capital Market is a part of financial system which is concerned with raising capital by dealing in shares, bonds and other long term investments.
The market where investment instruments like bonds, equities and mortgages are traded is known as the capital market.

Question 33.
Mention the objectives of demonetizations?
Answer:
Objectives of Demonetisation:

Removing Black Money from the country.
Stopping of Corruption.
Stopping Terror Funds.
Curbing Fake Notes.

Demonitisation is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change of national currency. The current form or forms of money is pulled from circulation, often to bereplaced with new coins or notes.

Part – D
Answer The Following Questions In About A Page.

Question 34.
Explain the role of Commercial Banks in economic development?
Answer:
Role of Commercial Banks in Economic Development of a Country Role of Commercial Banks:

Capital Formation
Creation of Credit
Channelizing the funds
Encouraging Rights Type of Industries
Banks Monetize Debt
Finance to Government
Employment Generation
Bank Promote Entrepreneurship

1. Capital Formation:

Banks play an important role in capital formation, which is essential for the economic development of a country.
They mobilize the small savings of the people scattered over a wide area through their network of branches all over the country and make it available for productive purposes.

2. Creation of Credit:

Banks create credit for the purpose of providing more funds for development projects.
Credit creation leads to increased production, employment, sales and prices and thereby they bring about faster economic development.

3. Channelizing the Funds towards Productive Investment:

Banks invest the savings mobilized by them for productive purposes.
Capital formation is not the only function of commercial banks.

4. Encouraging Right Type of Industries:

Many banks help in the development of the right type of industries by extending loan to right type of persons.
In this way, they help not only for industrialization of the country but also for the economic development of the country.
They grant loans and advances to manufacturers whose products are in great demand.

5. Banks Monetize Debt:

Commercial banks transform the loan to be repaid after a certain period into cash, which can be immediately used for business activities.
Manufacturers and wholesale traders cannot increase their sales without selling goods on credit basis.

6. Finance to Government:

Government is acting as the promoter of industries in underdeveloped countries for which finance is needed for it.
Banks provide long – term credit to Government by investing their funds in Government securities and short-term finance by purchasing Treasury Bills.

7. Employment Generation:

After the nationalization of big banks, banking industry has grown to a great extent.
Bank’s branches are opened frequently, which leads to the creation of new employment opportunities.

8. Banks Promote Entrepreneurship:

In recent days, banks have assumed the role of developing entrepreneurship particularly in developing countries like India by inducing new entrepreneurs to take up the well- formulated projects and provision of counseling services like technical and managerial guidance.

Question 36.
Elucidate the functions of Commercial Banks?
Answer:
The functions of commercial banks are broadly classified into primary functions and secondary functions.

Functions of Commercial Banks

(a) Primary Functions:
1. Accepting Deposits:
It implies that commercial banks are mainly dependent on public deposits.
There are two types of deposits

(I) Demand Deposits:
It refers to deposits that can be withdrawn by individuals without any prior notice to the bank. In other words, the owners of these deposits are allowed to withdraw money anytime by writing a withdrawal slip or a cheque at the bank counter or from ATM centres using debit card.

(II) Time Deposits:
It refers to deposits that are made for certain committed period of time. Banks pay higher interest on time deposits. These deposits can be withdrawn only after a specific time period by providing a written notice to the?bank.

2. Advancing Loans:

(a) It refers to granting loans to individuals and businesses. Commercial banks grant loans in the form of overdraft, cash credit, and discounting bills of exchange.

(b) Secondary Functions:
The secondary functions can be classified under three heads, namely, agency functions, general utility functions, and other functions.

1. Agency Functions:
It implies that commercial banks act as agents of customers by performing various functions.

(I) Collecting Cheques:
Banks collect cheques and bills of exchange on the behalf of their customers through clearing house facilities provided by the central bank.

(II) Collecting Income:
Commercial banks collect dividends, pension, salaries, rents, and interests on investments on behalf of their customers. A credit voucher is sent to customers for information when any income is collected by the bank.

(III) Paying Expenses:
Commercial banks make the payments of various obligations of customers, such as telephone bills, insurance premium, school fees, and rents.

2. General Utility Functions:
It implies that commercial banks provide some utility services to customers by performing various functions.

(I) Providing Locker Facilities:
Commercial banks provide locker facilities to its customers for safe custody of jewellery, shares, debentures, and other valuable items. This minimizes the risk of loss due to theft at homes. Banks are not responsible for the items in the lockers.

(II) Issuing Traveler’s Cheques:
Banks issue traveler’s cheques to individuals for traveling outside the country. Traveler’s cheques are the safe and easy way to protect money while traveling.

(III) Dealing in Foreign Exchange:
Commercial banks help in providing foreign exchange to businessmen dealing in exports and imports. However, commercial banks need to take the permission of the Central Bank for dealing in foreign exchange.

3. Transferring Funds:
It refers to transferring of funds from one bank to another. Funds are transferred by means of draft, telephonic transfer, and electronic transfer.

4. Letter of Credit:
Commercial banks issue letters of credit to their customers to certify their creditworthiness.

(I) Underwriting Securities:
Commercial banks also undertake the task of underwriting securities. As public has full faith in the credit worthiness of banks, public do not hesitate in buying the securities underwritten by banks.

(II) Electronic Banking:
It includes services, such as debit cards, credit cards, and Internet banking.

(I) Money Supply:
It refers to one of the important functions of commercial banks that help in increasing money supply.

(II) Credit Creation:
Credit Creation means the multiplication of loans and advances. Commercial banks receive deposits from the public and use these deposits to give loans.

Question 37.
Describe the functions of Reserve Bank of India?
Answer:
Functions of Central Bank (Reserve Bank of India):
The Reserve Bank of India (RBI) is India’s central banking institution, which controls the monetary policy of the Indian rupee.

1. Monetary Authority:
It controls the supply of money in the economy to stabilize exchange rate, maintain healthy balance of payment, attain financial stability, control inflation, strengthen banking system.

2. The issuer of currency:
The objective is to maintain the currency and credit system of the country. It is the sole authority to issue currency. It also takes action to control the circulation of fake currency.

3. The issuer of Banking License:
As per Sec 22 of Banking Regulation Act, every bank has to obtain a banking license from RBI to conduct banking business in India.

4. Banker to the Government:
It acts as banker both to the central and the state governments. It provides short-term credit. It manages all new issues of government loans, servicing the government debt outstanding and nurturing the market for government securities. It advises the government on banking and financial subjects.

5. Banker’s Bank:
RBI is the bank of all banks in India as it provides loan to banks, accept the deposit of banks, and rediscount the bills of banks.

6. Lender of last resort:
The banks can borrow from the RBI by keeping eligible securities as collateral at the time of need or crisis, when there is no other source.

7. Act as clearing house:
For settlement of banking transactions, RBI manages 14 clearing houses. It facilitates the exchange of instruments and processing of payment instructions.

8. Custodian of foreign exchange reserves:
It acts as a custodian of FOREX. It administers and enforces the provision of Foreign Exchange Management Act (FEMA), 1999. RBI buys and sells foreign currency to maintain the exchange rate of Indian rupee v/s foreign currencies.

9. Regulator of Economy:
It controls the money supply in the system, monitors different key indicators like GDP, Inflation, etc.

10. Managing Government securities:
RBI administers investments in institutions when they invest specified minimum proportions of their total assets/liabilities in government securities.

11. Regulator and Supervisor of Payment and Settlement Systems:
The Payment and Settlement Systems Act of 2007 (PSS Act) gives RBI oversight authority for the payment and settlement systems in the country. RBI focuses on the development and functioning of safe, secure and efficient payment and settlement mechanisms.

12. Developmental Role:
This role includes the development of the quality banking system in India and ensuring that credit is available to the productive sectors of the economy. It provides a wide range of promotional functions to support national objectives.

It also includes establishing institutions designed to build the country’s financial infrastructure. It also helps in expanding access to affordable financial services and promoting financial education and literacy.

13. Publisher of monetary data and other data:
RBI maintains and provides all essential banking and other economic data, formulating and critically evaluating the economic policies in India. RBI collects, collates and publishes data regularly.

14. Exchange manager and controller:
RBI represents India as a member of the International Monetary Fund [IMF], Most of the commercial banks are authorized dealers of RBI.

15. Banking Ombudsman Scheme:
RBI introduced the Banking Ombudsman Scheme in 1995. Under this scheme, the complainants can file their complaints in any form, including online and can also appeal to the Ombudsman against the awards and the other decisions of the Banks.

16. Banking Codes and Standards Board of India:
To measure the performance of banks against Codes and standards based on established global practices, the RBI has set up the Banking Codes and Standards Board of India (BCSBI).

Question 38.
What are the objectives of Monetary Policy? Explain?
The specific objectives of monetary policy are Objectives of monetary policy:

Neutrality of Money
Stability of Exchange Rates
Price Stability
Full Employment
Economic Growth
Equilibrium in the Balance of Payments

1. Neutrality of Money:

Economists like Wicksteed, Hayek and Robertson are the chief exponents of neutral money.
They hold the view that monetary authority should aim at neutrality of money in the economy.
Monetary changes could be the root cause of all economic fluctuations.
According to neutralists, the monetary change causes distortion and disturbances in the proper operation of the economic system of the country.

2. Exchange Rate Stability:

Exchange rate stability was the traditional objective of monetary authority.
This was the main objective under Gold Standard among different countries.
When there was disequilibrium in the balance of payments of the country, it was automatically corrected by movements.

3. Price Stability:

Economists like Crustave Cassel and Keynes suggested price stabilization as a main objective of monetary policy.
Price stability is considered the most genuine objective of monetary policy.
Stable prices repose public confidence.
It promotes business activity and ensures equitable distribution of income and wealth.

4. Full Employment:

During world depression, the problem of unemployment had increased rapidly.
It was regarded as socially dangerous, economically wasteful and morally deplorable.
Thus, full employment was considered as the main goal of monetary policy.

5. Economic Growth:

Economic growth is the process whereby the real per capita income of a country increases over a long period of time.
It implies an increase in the total physical or real output, production of goods for the satisfaction of human wants.
Monetary policy should promote sustained and continuous economic growth by maintaining equilibrium between the total demand for money and total production capacity and further creating favourable conditions for saving and investment.

6. Equilibrium in the Balance of Payments:

Equilibrium in the balance of payments is another objective of monetary policy which emerged significant in the post war years.

Samacheer Kalvi 12th Economics Banking Additional Questions and Answers

Part – A
I. Multiple Choice Questions.

Question 1.
Reserve Bank of India was nationalised in …………………………
(a) 1947
(b) 1948
(c) 1949
(d)1950
Answer:
(c) 1949

Question 2.
Overdraft is a facility offered by commercial banks to …………………………
(a) Exporters
(b) Importers
(c) Farmers
(d) Businessmen
Answer:
(d) Businessmen

Question 3.
Current account deposites are operated by …………………………
(a) Agriculturists
(b) Business mens
(c) Goverment servants
(d) Labourers
Answer:
(b) Business mens

Question 4.
Primary functions of the commercial bank is …………………………
(a) Accepting deposits from the public
(b) Making loans and advances to public
(c) Discounting bills of exchange
(d) Inter bank borrowing
Answer:
(a) Accepting deposits from the public

Question 5.
The first bank in India was established in …………………………
(a) 1670
(b) 1770
(c) 1870
(d) 1872
Answer:
(b) 1770

Question 6.
The coins are issued by …………………………
(a) Ministry of Finance
(b) RBI
(c) Central Bank
(d) State Bank
Answer:
(a) Ministry of Finance

Question 7.
The amount of cash kept by commercial banks to meet the day to day transactions is known as …………………………
(a) Bank cash
(b) Commercial bank cash
(c) Reserve cash
(d) Cheque
Answer:
(c) Reserve cash

Question 8.
In India, Central bank is known as –
(a) SBI
(b) RBI
(c) Commercial bank
(d) IDBI
Answer:
(b) RBI

Question 9.
Open Market operations enable the ………………………… to reduce the money supply in the economy.
(o) Commercial bank
(b) SBI
(c) ICICI
(d) RBI
Answer:
(d) RBI

Question 10.
………………………… Bank Finance the Import and Export trade.
(a) Industrial Bank
(b) Exim Bank
(c) Co – operative Bank
(d) RBI
Answer:
(b) Exim Bank

Question 11.
Commercial Banks create credit in favour of the …………………………
(a) Consumers
(b) Business men
(c) Customers
(d) Agriculturists
Answer:
(c) Customers

Question 12.
………………………… is a non profit making financial institution of the country.
(a) Central Bank
(b) Commercial Bank
(c) Co – operative Bank
(d) Industrial Bank
Answer:

Question 13.
Extending banking facilities to the rural and semi urban areas is the promotional activity of the …………………………
(a) Co – operative Bank
(b) Commercial Bank
(c) RBI
(d) State Bank
Answer:
(a) Co – operative Bank

Question 14.
The qualitative credit control methods are also called …………………………
(a) Selective cash control
(b) Selective expenditure control
(c) Selective credit control
(d) Selective money control
Answer:
(c) Selective credit control

Question 15.
Withdraw money more than deposit is called …………………………
(a) Cash credit
(b) Discounting bill
(c) Current account
(d) Over draft
Answer:
(d) Over draft

Question 16.
………………………… help in proper allocation of funds among different regions of the economy.
(a) Central banks
(b) Co – operative banks
(c) Commercial banks
(d) Agriculture banks
Answer:
(c) Commercial banks

Question 17.
Lowering the Bank rate off sets ……………………….. tendencies.
(a) Deflationary
(b) Inflationary
(c) Stagflationary
(d) Hyper inflationary
Answer:
(a) Deflationary

Question 18.
The main aim of the Central bank is …………………………
(a) Full employment
(b) Economic stability
(c) Balance of payment
(d) International capital movement
Answer:
(b) Economic stability

Question 19.
………………………… Bank regulates the credit and currency according to the economic situation of the country.
(a) State
(b) Commercial
(c) RBI
(d) Agriculture
Answer:
(b) Economic stability

Question 20.
………………………… credit control method mean the Regulation and control of the supply of the credit among its possible users.
(a) Quantitative
(b) Qualitative
(c) General
(d) Possible
Answer:
(b) Qualitative

Question 21.
The issue of paper money is the most important function of a …………………………
(a) Commercial Bank
(b) Central Bank
(c) ICICI Bank
(d) State Bank
Answer:
(b) Central Bank

Question 22.
………………………… stimulate saving and investment.
(a) Credit
(b) Bank
(c) Debit
(d) Cheque
Answer:
(b) Bank

Question 23.
The commercial banks only deal in foreign exchange under the directions of the …………………………
(a) State bank
(b) Central bank
(c) Commercial bank
(d) Co – operative bank
Answer:
(b) Central bank

Question 24.
Fixed Deposits are otherwise known as …………………………
(a) Bank Deposits
(b) Customer’s Deposits
(c) Time Deposits
(d) Money Deposits
Answer:
(c) Time Deposits

Question 25.
The rate of interest of every Central bank is known as …………………………
(a) Interest rate
(b) Credit rate
(c) Debit rate
(d) Bank rate
Answer:
(d) Bank rate

II. Match the following and choose the correct answer by using codes given below.

Question 1.
A. Saving Deposits – (i) Official minimum rate
B. Cash credit – (ii) Cheque facilities
C. Bank rate – (iii) Facility to business man
D. Over draft – (iv) Collateral security
Codes:
(a) A (ii) B (iv) C (i) D (iii)
(b) A (i) B (ii) C (iii) D (iv)
(c) A (iii) B (i) C (iv) D (ii)
(d) A (iv) B (iii) C (ii) D (i)
Answer:
(a) A (ii) B (iv) C (i) D (iii)

Question 2.
A. Transfer of funds – (i) Buying and selling
B. Commercial bank – (ii) Clearing
C. Open market operation – (iii) Interest not given
D. Demand deposits – (iv) Profit making
Codes:
(a) A (ii) B (iv) C (i) D (iii)
(b) A (i) B (iii) C (ii) D (iv)
(c) A (iii) B (ii) C (iv) D (i)
(d) A (iv) B (i) C (iii) D (ii)
Answer:
(a) A (ii) B (iv) C (i) D (iii)

Question 3.
A. NBFI – (i) Monetary policy
B. Per Capita Income – (ii) Minimum amount of fund
C. Inflation – (iii) Economic growth
D. RTGS – (iv) Non – bank Financial Institution
Codes:
(a) A (iii) B (ii) C (iv) D (i)
(b) A (iv) B (iii) C (i) D (ii)
(c) A (ii) B (i) C (iii) D (iv)
(d) A (i) B (iv) C (ii) D (iii)
Answer:
(b) A (iv) B (iii) C (i) D (ii)

Question 4.
A. UTI – (i) Quantitative credit control
B. Open market operation – (ii) Mutual fund
C. Bank – (iii) Automatic Teller mechine
D. ATM – (iv) Financial Institution
Codes:
(a) A (i) B (ii) C (iii) D (iv)
(b) A (iii) B (iv) C (ii) D (i)
(c) A (iv) B (iii) C (i) D (ii)
(d) A (ii) B (i) C (iv) D (iii)
Answer:
(d) A (ii) B (i) C (iv) D (iii)

Question 5.
A. NABARD – (i) Internet banking
B. SFC – (ii) Short term seasonal credit
C. Rationing of credit – (iii) State level institution
D. Online banking – (iv) Qualitative credit control of RBI
Codes:
(a) A (i) B (ii) C (iii) D (iv)
(b) A (iii) B (iv) C (i) D (ii)
(c) A (ii) B (iii) C (iv) D (i)
(d) A (iv) B (i) C (ii) D (iii)
Answer:
(c) A (ii) B (iii) C (iv) D (i)

III. State whether the statements are true or false.

Question 1.
(i) Business men operates the current account deposits.
(ii) State Bank organization established EXIM Bank

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(c) (i) is true but (ii) is false

Question 2.
(i) The Central bank of a country acts as the banker, fiscal agent and advisor to the government.
(ii) The banks expand their loans resulting in the expansion of investment employment production and prices.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(a) Both (i) and (ii) are true

Question 3.
(i) NABARD provides agriculture finance to medium and long term basis.
(ii) Bank observed that credit is the lubricant of all commerce and trade.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(a) Both (i) and (ii) are true

Question 4.
(i) State Bank is the financial advisor to the government.
(ii) Central Bank possesses the monopoly of note issue.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(d) (i) is false but (ii) is true

Question 5.
(i) For maintaining saving deposits, cheque facilities can be enjoyed.
(ii) Fixed Deposits are otherwise known as time deposits.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(a) Both (i) and (ii) are true

IV. Which of the following is correctly matched.

Question 1.
(a) EXIM Bank – Export and Import
(b) NABARD – Industrial finance
(c) Bank – Excess money
(d) Fixed Deposits – Bank saving
Answer:
(a) EXIM Bank – Export and Import

Question 2.
(a) CRR – Current Reserve Ratio
(b) Saving deposits – Cheque facilities
(c) Bank rate policy – High interest
(d) Adviser to government – SBI
Answer:
(b) Saving deposits – Cheque facilities

Question 3.
(a) ICICI Bank – Three tier Export Bank
(b) NABARD – Agriculture Finance
(c) IDBI – Co – operative Bank
(d) IFCI – State Bank
Answer:
(b) NABARD – Agriculture Finance

Question 4.
(a) South African Reserve Bank – 1921
(b) The Central bank of China – 1934
(c) The Reserve Bank of Newzealand – 1928
(d) The Reserve Bank of India – 1935
Answer:
(d) The Reserve Bank of India – 1935

Question 5.
(a) Forex cards – Smart card
(b) Paper currency – Legal tender
(c) Medium of Exchange – Functions of money
(d) CRR – Credit Reserve Ratio
Answer:
(c) Medium of Exchange – Functions of money

V. Which of the following is not correctly matched.

Question 1.
(a) RBI – Reserv e Bank of India
(b) SBI – State Bank of India
(c) IMF – International Monetary Fund
(d) ATM – Any Time Money
Answer:
(d) ATM – Any Time Money

Question 2.
(a) Qualitative credit control of RBI – Rationing of credit
(b) Agricultural credit department – To finance the rural sector
(c) NABARD – Short term seasonal credit
(d) UTI – Mutual fund
Answer:
(d) UTI – Mutual fund

Question 3.
(a) RBI – Central Bank of SBI
(b) ARDC – The agricultural refinance development corporation
(c) Bank Crdit – Bank loans and advances
(d) Moral suasion – Persuasion
Answer:
(a) RBI – Central Bank of SBI

Question 4.
(a) Traveler’s cheques – Group of people
(b) Credit creation – Multiplication of loans and advances
(c) Primary deposits – Passive deposits
(d) Bank – Financial Institution
Answer:
(a) Traveler’s cheques – Group of people

Question 5.
(a) RBI – Monetary authority
(b) Bank rate – Re – discounting
(c) Recession – Monetary policy
(d) Keynes – Economic growth
Answer:
(d) Keynes – Economic growth

Question 6.
(a) RTGS – Real Time Gross Settlement
(b) NEFT – National Electronic Fund Transfer
(c) ATM – Any Time Money
(d) SIDCO – Small Industrial Development Corporation
Answer:
(c) ATM – Any Time Money

VI. Pick the odd one out.

Question 1.
1. Commercial Bank Secondary Functions
(a) Agency functions
(b) General utility services
(c) Transfer of bank
(d) Credit creation
Answer:
(c) Transfer of bank

Question 2.
Functions of Central Bank
(a) Monetary Authority
(b) The issuer of currency
(c) Banker to the foreign level
(d) Banker’s Bank
Answer:
(c) Banker to the foreign level

Question 3.
The frequent methods of credit control under Selective method is called ……………………..
(a) Rationing of credit
(b) Direct Action of Industries
(c) Method of publicity
(d) Moral persuasion
Answer:
(b) Direct Action of Industries

Question 4.
Functions of ICICI is called ……………………..
(a) Assistance to Industries
(b) Merchant banking
(c) Credit bank operation
(d) Project promotion
Answer:
(c) Credit bank operation

Question 5.
The main objectives of Demonetisation ……………………..
(a) Removing black money from the country
(b) Stopping of corruption
(c) Stopping Terror Funds
(d) Fake notes given
Answer:
(d) Fake notes given

VII. Assertion and Reason.

Question 1.
Assertion (A): Commercial banks provide some utility services to the customers.
Reason (R): Credit creation leads to increased production, employment, sales and prices.

Question 2.
Assertion (A): Bank rate means re – discounting the first class securities.
Reason (R): Credit creation means not given loans and advances.

Question 3.
Assertion (A): Bank is service institution.
Reason (R): Commercial Bank is an institutions that provides accepting deposits and providing loans to the public.

Question 4.
Assertion (A): Credit creation leads to increase in production.
Reason (R): Credit creation means the multiplication of loans and advances.

Question 5.
Assertion (A): The objectives of demonetization is called issuing currency notes.
Reason (R): Black money accepted.

Question 6.
Assertion (A): Primary deposits are also called as passive deposits.
Reason (R): Passive deposits are also called as time deposits.

Part – B
Answer The Following Questions In One or Two Sentences.

Question 1.
What is meaning of primary deposite and derived deposit?
Answer:

The modem banks create deposits in two ways. They are primary deposit and derived deposit.
When a customer gives cash to the bank and the bank creates a book debt in his name called a deposit, it is known as a “primary deposit”.
But when such a deposit is created, without there being any prior payment of equivalent cash to the bank, it is called a ‘derived deposit’.

Question 2.
What are the functions of primary deposits?
Answer:
Primary Deposits:

It is out of these primary deposits that the bank makes loans and advances to its customers.
The initiative is taken by the customers themselves. In this case, the role of the bank is passive.
So these deposits are also called “Passive deposits”.

Question 3.
What are the credit control measures?
Answer:

Question 4.
Define RBI Rural credit?
Answer:
Reserve Bank of India and Rural Credit:
In a developing econorqy like India, the Central bank of the country cannot confine itself to the monetary regulation only, and it is expected that it should take part in development function in all sectors especially in the agriculture and industry.

Question 5.
Write RBI granting Regional Rural Banks concessions?
Answer:
The RBI has been granting many concessions to RRBs:

1. They are allowed to maintain cash reserve ratio at 3 per cent and statutory liquidity ratio at 25 per cent; and
2. They also provide refinance facilities through NABARD.

Question 6.
Define Three Tier co – operative credit structure?
Answer:

Part – C
Answer The Following Questions In One Paragraph.

Question 1.
What are the functions of RBI agricultural credit?
Answer:
Role of RBI in agricultural credit:

RBI has been playing a very vital role in the provision of agricultural finance in the country.
The Bank’s responsibility in this field had been increased due to the predominance of agriculture in the Indian economy and the inadequacy of the formal agencies to cater to the huge requirements of the sector.
In order to fulfill this important role effectively, the RBI set up a separate Agriculture Credit Department.
However, the volume of informal loans has not declined sufficiently.

Question 2.
What are the ARDC – objectives?
Answer:
Objectives of the ARDC:

To provide necessary funds by way of refinance to eligible institutions such as the Central Land Development Banks, State Co – operative Banks, and Scheduled banks.
To subscribe to the debentures floated by the Central Land Development banks, State Co-operative Banks, and Scheduled banks, provided they were approved by the RBI.

Question 3.
Describe the functions of IDBI?
Answer:
Functions of IDBI:

The functions of IDBI fall into two groups
1. Assistance to other financial institutions; and –
2. Direct assistance to industrial concerns either on its own or in participation with other institutions.
The IDBI can provide refinance in respect of term loans to industrial concerns given by the IFC, the SFCs, other financial institutions notified by the Government, scheduled banks and state cooperative banks.
A special feature of the IDBI is the provision for the creation of a special fund known as the Development Assistance Fund.
The fund is intended to provide assistance to industries which require heavy investments with low anticipated rate of return.
Such industries may not be able to get assistance in the normal course.
The financing of exports was also undertaken by the IDBI till the establishment of EXIM BANK in March, 1982.

Question 4.
Difference between NEFT and RTGS?
Answer:
NEFT:

National electronic Fund Transfer
Transactions happens in batches hence slow
Timings: 8:00 am to 6:30 pm (12:30 pm on Saturday)
No minimum limit

RTGS:

Real Time Gross Settlement
Transactions happens in real time hence fast
Timings : 9:00 am to 4:30 pm (1:30 pm on Saturday)
Minimum amount for RTGS transfer is ₹ 2 lakhs

Question 5.
What is E – Banking?
Answer:

Online banking, also known as internet banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution’s website.
The online banking system typically connects to or be part of the core banking system operated by a bank and is in contrast to branch banking which was the traditional way customers accessed banking services.

Part – D
Answer The Following Questions In One Page.

Question 1.
Describe the frequent methods of selective method credit control?
Answer:
Qualitative or Selective Method of Credit Control:

The qualitative or the selective methods are directed towards the diversion of credit into particular uses or channels in the economy.
Their objective is mainly to control and regulate the flow of credit into particular industries or businesses.
The following are the frequent methods of credit control under selective method:
Rationing of Credit:
1. Direct Action
2. Moral Persuasion
3. Method of Publicity
4. Regulation of Consumer’s Credit
5. Regulating the Marginal Requirements on Security Loans
6. Rationing of Credit:

1. Rationing of Credit:

This is the oldest method of credit control.
Rationing of credit as an instrument of credit control was first used by the Bank of England by the end of the 18th Century.
It aims to control and regulate the purposes for which credit is granted by commercial banks. It is generally of two types.

(I) The variable portfolio ceiling:
It refers to the system by which the central bank fixes ceiling or maximum amount of loans and advances for every commercial bank.

(II) The variable capital asset ratio:
It refers to the system by which the central bank fixes the ratio which the capital of the commercial bank should have to the total assets of the bank.

2. Direct Action:
Direct action against the erring banks can take the following forms.

The central bank may refuse to altogether grant discounting facilities to such banks.
The central bank may refuse to sanction further financial accommodation to a bank whose existing borrowing are found to be in excess of its capital and reserves.
The central bank may start charging penal rate of interest on money borrowed by a bank beyond the prescribed limit.

3. Moral Suasion:

This method is frequently adopted by the Central Bank to exercise control over the Commercial Banks.
Under this method Central Bank gives advice, then requests and persuades the Commercial Banks to co-operate with the Central Bank in implementing its credit policies.

4. Publicity:

Central Bank in order to make their policies successful, take the course of the medium of publicity.
A policy can be effectively successful only when an effective public opinion is created in its favour.

5. Regulation of Consumer’s Credit:

The down payment is raised and the number of installments reduced for the credit sale, (vz) Changes in the Marginal Requirements on Security Loans:
This system is mostly followed in U.S.A.
Under this system, the Board of Governors of the Federal Reserve System has been given the power to prescribe margin requirements for the purpose of preventing an excessive use of credit for stock exchange speculation.

Question 2.
Describe the Merger of Banks?
Answer:
Merger of Banks:

1. Union Cabinet decided to merge all the remaining five associate banks of State Bank Group with State Bank of India in 2017.

2. After the Parliament passed the merger Bill, the subsidiary banks have ceased to exist.

3. Five associates and the Bharatiya Mahila Bank have become the part of State Bank of India (SBI) beginning April 1, 2017.

4. This has placed State Bank of India among the top 50 banks in the world.

5. The five associate banks that were merged are State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT).

6. The other two Associate Banks namely State Bank of Indore and State Bank of Saurashtra had already been merged with State Bank of India.

7. After the merger, the total customer base of SBI increased to 37 crore with a branch network of around 24,000 and around 60,000 ATMs across the country.

Question 3.
Briefly describe the ATM?
Answer:
ATM (Automated Teller Machine):

ATMs transformed the bank tech system when they were first introduced in 1967.
The next revolution in ATMs is likely to involve contactless payments.
Much like Apple Pay or Google Wallet, soon we will be able to conduct contactless ATM transactions using a smartphone.
Some ATM innovations are already available overseas.
For example, biometric authentication is already used in India, and its recognition is in place at Qatar National Bank ATMs.
These technologies can help overall bank security by protecting against ATM hacks.

Question 4.
Explain the State Industrial Development Corporations?
Answer:
State Industrial Development Corporations (SIDCOs):

The Industrial Development Corporations have been set up by the state governments and they are wholly owned by them.
These institutions are not merely financing agencies; they are entrusted with the responsibility of accelerating the industrialization of their states.

SIDCO (Small Industrial Development Corporation):

SIDCOs provide financial assistance to industrial concerns by way of loans guarantees and underwriting of or direct subscriptions to shares and debentures.
In addition to these, they undertake various promotional activities, such as conducting techno-economic surveys, project identification, preparation of feasibility studies and selection and training of entrepreneurs.
They also promote joint sector projects in association with private promoter in such type of projects.
SIDCOs take 26 percent, private co-promoter takes 25 percent of the equity, and the rest is offered to the investing public.
SIDCOs undertake the development of industrial areas by providing all infrastructural facilities and initiation of new growth centers.
They also administer various State government incentive schemes.
SIDCOs get refinance facilities form IDBI.
They also borrow through bonds and accept deposits.

Samacheer Kalvi 11th Commerce Solutions Chapter 22 Types of Trade

Leave a Comment / Class 11 / By Bhagya

Students can Download Commerce Chapter 22 Types of Trade Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 22 Types of Trade

Samacheer Kalvi 11th Commerce Types of Trade Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
The purchase of goods from a foreign country is called ………………
(a) Import
(b) Export
(c) Entrepot
(d) Re – export
Answer:
(a) Import

Question 2.
When goods are imported for the purpose of export it is called as ………………
(a) Foreign Trade
(b) Home Trade
(c) Entrepot
(d) Trade
Answer:
(c) Entrepot

Question 3.
……………… acts as a connective link between the producer and the consumer.
(a) Trade
(b) Industry
(c) Commerce
(d) Business
Answer:
(a) Trade

Question 4.
The aim of home trade is ………………
(a) To raise the standard of living
(b) To provide the essential goods and services economically
(c) To raise the national income
(d) To obtain all types of goods
Answer:
(b) To provide the essential goods and services economically

Question 5.
Internal trade can be classified into ……………… categories
(a) Three
(b) Four
(c) Two
(d) Five
Answer:
(c) Two

II. Very Short Answer Questions

Question 1.
Give the meaning of Trade?
Answer:
The buying and selling of goods and services consist of trade. Trade is conducted in order to earn a profit. Trade acts as an intermediary in the exchange of commodities between the producer and consumer.

Question 2.
What is Internal Trade?
Answer:
Buying and selling of goods and services within the boundaries of a nation are called internal trade. Internal trade is also called domestic trade or home trade.

Question 3.
Mr. Vikram who runs a textile industry regularly procures cotton from Germany. Name the type of trade he is engaged in.
Answer:
This is Import trade because Mr. Vikram procures (purchases) cotton from Germany Import means buying of goods from a foreign country for domestic use.

Question 4.
When Vikram of India sells cotton shirts to Amal of England, what type of trade he is engaged in?
Answer:
Vikram of India sells cotton shirts to Amal of England. So he is engaged in Export trade. Export trade means the sale of domestic goods to foreign countries.

Question 5.
How do you classify Trade?
Answer:
According to the geographical location of buyers and sellers, trade can be classified into internal and external trade.

Question 6.
What are the classifications of internal trade?
Answer:
Type of International trade: Home trade consists of two main subdivisions namely (i) Wholesale trade and (ii) Retail trade.

Question 7.
What is import trade?
Answer:
Import trade means buying goods from a foreign country for domestic use.
Example. India imports petroleum products from Gulf Countries.

Question 8.
Explain the meaning of the Entrepot trade.
Answer:
Entrepot trade means importing goods from one country and exporting the same to foreign countries. It is also known as ‘Re-export trade’.

Question 9.
TVS is selling motorbikes in Europe. Under which type of trade can this be classified?
Answer:
Selling of motorbikes from India to Europe is classified under Export Trade.

Question 10.
What is the currency used in India in internal trade?
Answer:
INR (Indian Rupee) is used in India in internal trade. Payment of goods and services is made in the currency of the home country.

III. Short Answer Questions

Question 1.
What is the classification of Foreign trade?
Answer:
Foreign Trade can be classified into Import Trade, Export Trade, and Entrepot Trade.

Question 2.
Give two examples of Entrepot trade.
Answer:

Indian diamond merchants in Surat import uncut raw diamonds from South Africa.
They cut and polish the diamonds in their units in India and re-export them to the International Diamond Market in Amsterdam.
Singapore, Dubai, Hongkong are the largest entrepot trade centers in the world.

Question 3.
What do you mean by Export trade?
Answer:
Export trade means the sale of domestic goods to foreign countries. Export trade is necessary to sell domestic surplus goods, to make better utilization of resources, to earn foreign exchange, to increase national income, to generate employment, and to increase Government revenue. E.g Export of Iron ore from India to Japan.

Question 4.
What is Wholesale trade?
Answer:
“Purchase of goods in bulk from the manufacturers and selling them in smaller quantities to other intermediaries” is known as wholesale trade.

Question 5.
State the meaning of Retail trade.
Answer:
The distribution of goods in small quantities directly to the consumers is known as retail trade.

Question 6.
Name any three retail traders in your locality.
Answer:

Nilgiris Super Market
Reliance Fresh
A.N.S. Pandian Stores

Question 7.
State the main aim of trade.
Answer:
The main aim of trade is to make goods and services available to those persons who need them and are able to willing to pay for them.

IV. Long Answer Questions

Question 1.
What are the features of Internal trade?
Answer:
Meaning: Buying and selling of goods and services within the boundaries of a nation are called internal trade. It takes place between buyers and sellers in the same locality, village, town or city or in different states, but definitely within the same country.
The following are the features of internal trade

The buying and selling of goods take place within the boundaries of the same country.
Payment for goods and services is made in the currency of the home country.
It involves transactions between the producers, consumers, and middlemen.
It consists of a distribution network of middlemen and agencies engaged in an exchange of goods and services.
In-home trade the risk of transportation is very less when’ compared to foreign trade.
In-home trade the laws prevailing in that country only have to be followed.
The aim of home trade is to provide goods and services economically.
The goods must be a part of domestic production.
Goods must be purchased from an individual or a firm established within a country.
Goods can be delivered using locally available modes of transport, k.
It does not involve any custom/import duty, but buyers need to pay the taxes to the Government.

Question 2.
Explain briefly the different types of Foreign trade?
Answer:
A. Import Trade:
Import trade means buying goods from a foreign country for domestic use. Example. India imports petroleum products from Gulf Countries. India imports machinery, equipment, materials, etc. It is necessary to speed-up industrialization, to meet consumer demands, and improve the standard of living.

B. Export Trade:
Export trade means the sale of domestic goods to foreign countries.
Examples:

Export of Iron ore from India to Japan
Selling of Tea from India to England.
Export of jasmine flowers from Madurai to Singapore

Export trade is necessary to sell domestic surplus goods, to make better utilization of resources, to earn foreign exchange, to increase national income, to generate employment, and to increase Government revenue

C. Entrepot Trade:
Entrepot trade means importing goods from one country and exporting the same to foreign countries. lt is also known as “Re-export trade’.

Example Indian diamond merchants in Surat import uncut raw diamonds from South Africa. They cut and polish the diamonds in their units in India and re-export them to the International Diamond Market in Amsterdam.

Samacheer Kalvi 11th Commerce Types of Trade Additional Questions and Answers

I. Choose the Correct Answer

Question 1.
……………… trade is a trade between a seller and buyer of different countries.
(a) Foreign
(b) Export
(c) Entrepot
(d) Home
Answer:
(a) Foreign

Question 2.
……………… trade deals with the distribution of goods in small quantities to the consumers.
(a) Retail
(b) Wholesale
(c) Home
(d) Foreign
Answer:
(a) Retail

Question 3.
Selling of Tea from India to England – What type of trade is this?
Answer:
(a) Export
(b) Import
(c) Entrepot
(d) Home
Answer:
(a) Export

Question 4.
Re-export trade is otherwise called as ……………… trade.
(a) Entrepot
(b) Export
(c) Import
(d) Foreign
Answer:
(a) Entrepot

Question 5.
Hero pens produced in China and sold in India is an example for ……………… trade.
(a) Foreign
(b) Home
(c) Export
(d) Entrepot
Answer:
(a) Foreign

Case Study

Question 1.
Mr. Kovalan completed his M.Com. degree and proposed to start a business dealing with power loom machines. After a complete analysis, it was found that it is better to buy from foreign countries than to buy from domestic manufacturers. So what is your opinion whether to purchase from foreign countries or from domestic manufacturers?
Answer:
In my opinion, if he purchases from foreign countries, it will be a quality one. It will work for a long time. First of all, he should get the quotation from all countries. He can choose which is the low cost and high-quality machines. A very good brand also can be chosen.

Samacheer Kalvi 11th Commerce Solutions Chapter 21 Micro, Small and Medium Enterprises (MSME) and Self Help Groups (SHGs)

Leave a Comment / Class 11 / By Bhagya

Students can Download Commerce Chapter 21 Micro, Small and Medium Enterprises (MSME) and Self Help Groups (SHGs) Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 21 Micro, Small and Medium Enterprises (MSME) and Self Help Groups (SHGs)

Samacheer Kalvi 11th Commerce Micro, Small and Medium Enterprises (MSME) and Self Help Groups (SHGs) Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
MSMED Act was enacted in the year ………………
(a) 2004
(b) 2007
(c) 2006
(d) 2008
Answer:
(c) 2006

Question 2.
MSMEs are important for the nation’s economy because they significantly contribute to ………………
(a) industrial production
(b) exports
(c) employment
(d) all the above
Answer:
(d) all the above

Question 3.
Self-help groups convert the savings into a common fund known as ………………
(a) Common fund
(b) Group corpus fund
(c) Group fund
(d) none of the above
Answer:
(b) Group corpus fund

Question 4.
There are ……………… distinct modes of credit to Self Help Groups.
(a) 1
(b) 2
(c) 3
(d) 4
Answer:
(c) 3

Question 5.
The investment limit of a micro-enterprise under the manufacturing sector does not exceed ……………… lakhs.
(a) 10
(b) 20
(c) 25
(d) 50
Answer:
(c) 25

II. Very Short Answer Questions

Question 1.
What do you understand by the manufacturing enterprises?
Answer:
The enterprises engaged in the manufacturing or production of goods pertaining to any industry specified in the first schedule to the Industries Development and Regulation Act, 1951 are known as manufacturing enterprises.

Question 2.
Give some examples for micro-enterprises.
Answer:
Micro enterprises are engaged in low scale activities such as clay pot making, fruits and vegetable vendors, transport (three-wheeler tempos and autos), repair shops, cottage industries, small industries, handlooms, handicraft works, etc.

Question 3.
What is the aim of NEEDS?
Answer:
The aim of NEEDS is Lo provide entrepreneurship development training to educated young entrepreneurs, preparing business plans, and helping them to tie up with financial institutions to set up new business ventures.

Question 4.
What is a Self Help Group?
Answer:
Rural development is one of the main pillars of the progress of India. It has lagged behind in many aspects of development even after six decades of the independence of India. Self Help Group has emerged as a new model for combating poverty.

Question 5.
State the investment limit for small enterprises in the manufacturing and service sectors.
Answer:

III. Short Answer Questions

Question 1.
State the investment limit for a medium enterprises engaged in the Manufacturing and service sector.
Answer:

Question 2.
List out the products produced by MSME in Tamil Nadu?
Answer:
In Tamil Nadu, the MSMEs sector produces textile, electronic products, engineering products, auto ancillaries, leather products, chemicals, plastics, garments, jewellery etc.

Question 3.
What is the role and significance of MSMEs in the Indian Economy?
Answer:
Entrepreneurship is the key to the economic development of any country. By empowering entrepreneurs, the MSME sector provides more employment opportunities to the people of India. It helps towards the industrialization of rural and backward areas. This sector reduces regional imbalance. It provides equality distribution of national’ income and wealth.

Question 4.
Explain any three features of the Self Help Group.
Answer:
The following are the main features of Self Help Group:

The motto of every group members should be “saving first — credit later”
Self Help Group is homogenèous in terms of economic status.
The ideal size of a Self Help Group ranges between 10 and 20 members.

Question 5.
What are the different ways in which banks fund Self Help Groups?
Answer:
There are three distinct modes of credit to SHGs. Under the first mode, banks lend directly to the SHGs. In the second mode, banks provide loans to the NGOs for onward lending to the SHGs and ultimately to micro-entrepreneurs. Under the third mode, banks extend credit to the SHGs with the NGOs serving as facilitators. Out of these three methods, the last method of direct lending by bank with NGOs facilitation is widely practised.

IV. Long Answer Questions

Question 1.
What is the definition of MSME?
Answer:
The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:

Enterprises engaged in the manufacture or production, processing, or preservation of goods as specified below:
A microenterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
A small enterprise is an enterprise where the investment in plant and machinery is ‘ more than Rs. 25 lakh but does not exceed Rs. 5 crores;
A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5crore but does not exceed Rs.10 crore.
In the case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No.S.0.1722 (E) dated October 5, 2006.

Question 2.
Explain the advantages of MSMEs?
Answer:

Employment Potential: MSMEs generate more employment opportunities than large business concerns.
Low Production Cost: MSMEs do not require skilled laborers or professionals to run the organization. It employs cheap labour and thus minimizes the overhead.
Low Investment: MSMEs do not require huge capital to start the unit. It can employ locally available resources within the reach of the owner.
Quick Decision Making: MSMEs need not hire professional managers to run the management on a day to day basis.
Supplementary Role: MSMEs play a complementary role to serve as a feeder to large-scale industries.
Establishment of Socialistic Pattern of Society: MSME sector contributes towards the establishment of a socialistic, pattern of society by reducing the concentration of income and wealth.
Balanced Regional Development: By encouraging MSMEs in industrially backward areas of India, balanced development can be achieved across all regions.
Promotion of Self Employment and Self Reliance Spirit: MSMEs help to a great deal in developing a class of entrepreneurs.
Higher Contribution to Manufacturing and Export: MSMEs contribute 45% to the total manufacturing output and 40% to the exports from the country. It helps in earning precious foreign exchange in various countries across the world.

Question 3.
What are the objectives of SHGs?
Answer:
The following are the objectives of Self Help Groups:

Focusing on the empowerment of women.
Saving people from the clutches of money lenders
Building capacity of women and enabling them to participate in generating activities.
Creating the habit of saving in the minds of the people who are economically backward. .
Promoting entrepreneurship skills among women.
Creating awareness about the importance of credit circle or revolving credit and the payment of the circle.
Elevating the economic standard of the member’s families.
Developing skills and facilitating credit’ linkages for eventual economic empowerment:
Promoting awareness among the members about finding solutions for their economic problems.
Identifying the common interest of the group members and carrying out their operations in the most efficient and economical way.
Enabling the members to overcome all social and economic barriers.
Promising and ensuring human rights to women at all stages of their life cycle.

Question 4.
Explain the advantages of MSME?
Answer:
The MSME sector contributes about 8% to Gross Domestic Product (GDP) besides 45% to the total manufacturing output and 40% to the exports from the country on the production of more than 6000 products. This Sector consists of 36 million units and provides employment to over 8 crore people.

Samacheer Kalvi 11th Commerce Micro, Small and Medium Enterprises (MSME) and Self Help Groups (SHGs) Additional Questions and Answers

I. Choose the Correct Answer

Question 1.
Tamil Nadu Corporation for Development of Women Limited (TNCDW) was established in the year …………….
(a) 1983
(b) 1984
(c) 1985
(d) 1995
Answer:
(a) 1983

Question 2.
“Mahalir Thittam” project was launched during …………….
(a) 1997 – 98
(b)1999 – 99
(c) 1999 – 2000
(d) 2000 – 2001
Answer:
(a) 1997 – 98

II. Very Short Answer Questions

Question 1.
State the investment limit for microenterprise in the manufacturing and service sector.
Answer:

Question 2.
Give examples for Public Sector Banks.
Answer:
State Bank of India, Indian Bank, Indian Overseas Bank, Canara Bank.

For Future Learning

Question a.
World Association of Small & Medium enterprises (WASME)
Answer:
WASME is a global non-profit organization. The headquarters is in Noida.

Question b.
Ministry of MSME and its functions.
Answer:
MSME – Micro, Small, Medium Enterprises.

Ministry: Ministry of MSME, a branch of the Government of India, is the apex body for the formulation and administration of rules, regulations and laws relating to MSME in India.

Functions:
MSME: consequent to the increased globalization of the Indian economy and changed industrial environment. MSME is currently focusing on providing support in the fields of credit, marketing, technology and infrastructure to MSME.

Samacheer Kalvi 11th Commerce Solutions Chapter 29 Elements of Contract

Leave a Comment / Class 11 / By Bhagya

Students can Download Commerce Chapter 29 Elements of Contract Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 29 Elements of Contract

Samacheer Kalvi 11th Commerce Elements of Contract Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
An agreement enforceable by law is a ………………
(a) Enforceable acceptance
(b) Accepted offer
(c) Approved promise
(d) Contract
Answer:
(d) Contract

Question 2.
Every promise and every set of promises, forming the consideration for each other, is an ………………
(a) Agreement
(b) Contract
(c) Offer
(d) Acceptance
Answer:
(a) Agreement

Question 3.
Void agreement signifies ………………
(a) Agreement illegal in nature
(b) Agreement not enforceable by law
(c) Agreement violating legal procedure
(d) Agreement against public policy
Answer:
(b) Agreement not enforceable by law

Question 4.
Acceptance to be valid must ………………
(a) Be absolute
(b) Be unqualified
(c) Both be absolute & unqualified
(d) Be conditional
Answer:
(c) Both be absolute & unqualified

Question 5.
A contract with or by a minor is a ………………
(a) Valid contract
(b) Void contract
(c) Voidable contract
(d) Voidable at the option of either party
Answer:
(b) Void contract

II. Very Short Answer Questions

Question 1.
What is law?
Answer:
Law is a set of rules which governs our behaviour and relating in a civilized society.

Question 2.
Why should one know the law?
Answer:
One to should know the law to which he is subjected because ignorance of the law is no excuse.

Question 3.
Can a minor enter into a Contract?
Answer:
As per the Indian Contract Act 1872, a contract entered by or with a minor is void as well as void-abinitio. Which means it has no legal effect from the very beginning.

Question 4.
Who can enter into a Contract?
Answer:
The Indian Contract Act specifies that every person is competent to contract provided he is of the age of majority according to the Law which he is subject to and who is of sound mind.

Question 5.
Define Contract.
Answer:
As per the Indian Contract Act, 1872, a “contract” is an agreement enforceable by law. The agreements not enforceable by law are not contracts.
Contract = Agreement + Enforceability by law.

III. Short Answer Questions

Question 1.
Define Offer.
Answer:
Offer (i.e. Proposal) [section 2(a)]: When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other person either to such act or abstinence, he is said to make a proposal.

Question 2.
What do you mean by Agreement?
Answer:
According to section 2(e) of the Indian Contract Act, Agreement is every promise and a set of promises forming consideration for each other is an agreement. In short, Agreement = Offer +Acceptance.

Question 3.
Define a Voidable Contract.
Answer:
An agreement which is enforceable by law at the option of one or more parties but not at the option of the other- or others is a voidable contract. This is the result of coercion, undue influence, fraud, and misrepresentation.

Question 4.
What do you mean by Revocation?
Answer:
Revocation refers to the canceling or annulment of something by some authority. When revocation happens, a privilege, title, or status is removed from someone.

Question 5.
Who is a promisor, promisee?
Answer:

A promisor – Contract law – a person who makes a promise.
A promisee – Contract law – a person to whom a promise is made.

IV. Long Answer Questions

Question 1.
Explain the essentials of a Valid Contract
Answer:
Offer and Acceptance:
There must be two parties to an agreement namely one party making the offer and the other party accepting it.

Legal Relationship:
The parties must have the intention to create legal relations between them. An agreement of Social or domestic nature is not at all a contract.

Lawful Consideration (quid pro quo):
As per Contract Act under Sec.2 (d) Consideration means something in return. A contract without consideration becomes invalid It may be in cash or kind or in any form as specified m the act. Consideration must not be unlawful, immoral or opposed to the public policy.

Lawful Object (Section 23):
The object of the agreement should be lawful and legal. It must not be immoral, illegal or opposed to public policy. Two persons cannot enter into an agreement to do a criminal act.

Free Consent (Section 13 & 14):
Consent of the parties must be free and genuine. Consent means agreeing upon same, thing in the same sense at the same time i.e. there should be a consensus – ad – idem. Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation, or mistake.

Capacity of Parties (Section 11):
The parties to a contract must have the capacity (legal ability) to make valid contract.

Certainty of Terms (Section 29):
The agreement should be clear to the parties of the agreement. The agreement must be precise.
For example, X informs Y “I agree to sell my car’. X has four cars. Here nothing is stated about which car he is going to sell. There is no clarity of terms.

Possibility of Performance (Section 56):
The terms of the agreement should be capable of performing. An agreement to do an act, impossible in itself cannot be enforced. For example, A agrees to B to discover a new planet. The agreement is void because the act in itself is impossible to be performed from the very beginning.

Not declared Void:
The agreement should be such that it should be capable of being enforced by law. Certain agreements have been expressly declared illegal or void by the law.

Necessary Legal Formalities:
A contract may be oral or in writing. Where a particular type of contract is required by law to be in writing and registered, it must comply with necessary formalities as to writing, registration, and attestation. If legal formalities are not carried out then the contract is not enforceable by law.

Question 2.
Difference between Contract and Agreement.
Answer:

Question 3.
Explain the classification of Contract on the basis of the Validity.
Answer:
1. Valid Contract:
An agreement which fulfills all the essentials prescribed by law on the basis of its creation. For example, S offers to sell his car for Rs.2,00,000to T. T agrees to buy it. It is a Valid Contract.

2. Void Contract (2(j)):
A contract which ceases to be enforceable by law. A contract which does not satisfy any of the essential elements of a valid contract is said to be Void. For example, A contract between drug dealers to buy and sell drugs is a void contract.

3. Voidable Contract 2(i):
An agreement which is enforceable by law at the option of one or more parties but not at the option of the other or others is a voidable contract. This is the result of coercion, undue influence, fraud, and misrepresentation.

4. Illegal Contract:
It is a contract which is forbidden by law.
All illegal agreements are Void but all void agreements or contracts are not necessarily illegal. A contract that is immoral or opposed to public policy is illegal in nature, i. Unlike illegal agreements, there is no punishment to the parties to avoid agreement, ii. Illegal agreements are void from the very beginning but sometimes valid contracts may subsequently become void.

5. Unenforceable Contract:
Where a contract is unenforceable because of i some technical defect i.e. absence in writing j barred by imitation etc. If the parties perform j the contract it will be valid, but the court will j not compel them if they do not.

Question 4.
Explain the classification of Contract on the basis of the Formation.
Answer:
1. Express Contract: A contract made by word spoken or written. According to Section. 9, in so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. For example, P says to Q ‘will you buy my bicycle for Rs. 1,000?” Q says to P “Yes”.

2. Implied Contract: The implied contract is one, which is not expressly written but understood by the conduct of parties. Where the proposal or acceptance of any promise is made otherwise than in words, the promise is said to be implied. For example, A gets into a public bus, there is an implied contract that he will pay the bus fare.

3. Quasi Contract: It is a contract created by law. Actually, there is no contract. It is based on the principle that “a person shall not be allowed to enrich himself unjustly at the expense of the other”. In other words it is an obligation of one party to another imposed by law independent of an agreement between the parties.

4. Tacit Contract: A contract is said to be tacit when it has to be inferred from the conduct of the parties. For example, obtaining cash through an automatic teller machine, sale by fall of the hammer of an auction sale.

Question 5.
Explain the classification of Contract on the basis of the Performance.
Answer:
Executed Contract:
A contract in which both the parties have fulfilled their obligations under the contract. For example X contracts to buy a car from Y by paying cash, Y instantly delivers his car.

Executory Contract:
A contract in which both the parties are yet to fulfill their obligations, it is said to be an executor contract. For example, A agrees to buy B’s cycle by promising to pay cash on 15th June. B agrees to deliver the cycle on 20th June.

Unilateral Contract:
A unilateral contract is a one-sided contract in which only one party has performed his promise or obligation, the other party has to perform his promise or obligation. For example, X promises to pay Y a sum of Rs. 10,000 for the goods to be delivered by Y. X paid the money and Y is yet to deliver the goods.

Bilateral Contract:
A contract in which both the parties commit to performing their respective promises is called a bilateral contract. For example, R offers to sell his fiat car to S for Rs. 10, 00,000 on acceptance of R’s offer by S, there is a promise by R to sell the car and there is a promise by S to purchase the car, there are two promises.

For Future Learning

Question 1.
After studying this chapter anyone can enter into a Valid Contract and can also identify the essentials present in the contract.
Answer:
Anyone can enter into a valid contract but he must attain the age of majority. He should be sound mind.

Question 2.
After understanding this chapter entering into Offer and giving Acceptance becomes easier.
Answer:
Offer – Proposal
Acceptance – Proposal is accepted

Question 3.
After going through this chapter the value of consideration and the requirement for return payment can be understood better.
Answer:
Consideration means something in return.

Question 4.
After reviewing this chapter the parties who are allowed to enter and the parties who are not allowed to enter into a contract can be clearly demarcated.
Answer:
Major can enter into a contract with a sound mind. Minor cannot enter into a contract with an unsound mind.

Question 5.
After analyzing this chapter an obligation imposed by law – Quasi Contracts are better understood and distinguished from other contracts.
Answer:
It is an obligation of one party to another imposed by law independent of an agreement between the parties.

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Samacheer Kalvi 11th Commerce Types of Trade Textbook Exercise Questions and Answers

Samacheer Kalvi 11th Commerce Types of Trade Additional Questions and Answers

Samacheer Kalvi 11th Commerce Solutions Chapter 21 Micro, Small and Medium Enterprises (MSME) and Self Help Groups (SHGs)

Samacheer Kalvi 11th Commerce Micro, Small and Medium Enterprises (MSME) and Self Help Groups (SHGs) Textbook Exercise Questions and Answers

Samacheer Kalvi 11th Commerce Micro, Small and Medium Enterprises (MSME) and Self Help Groups (SHGs) Additional Questions and Answers

Samacheer Kalvi 11th Commerce Solutions Chapter 29 Elements of Contract

Samacheer Kalvi 11th Commerce Elements of Contract Textbook Exercise Questions and Answers