Important Questions – Page 5

TN Board 12th Economics Important Questions Chapter 6 Banking

November 6, 2021

TN State Board 12th Economics Important Questions Chapter 6 Banking

Question 1.
Define Commercial banks.
Answer:
It 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.

Question 2.
What is credit creation?
Answer:
Credit creation is done to provide more funds for developments projects. It leads to increased production, employment, sales, prices and faster economic development.

Question 3.
Define Central bank.
Answer:
The National bank which provides Banking and Financial services for the Government and Banking system. It also implements monetary policy of the government including issuing of currencies.

Question 4.
Distinguish between CRR and SLR.
Answer:

CRR	SLR
Cash Reserve ratio.	Statutory Liquidity Ratio.
The commercial bank has to maintain reserve with the RBI is called CRR.	The amount which a bank has to maintain in the form of cash or gold or approved securities is called SLR.
CRR regulates the flow of money in the economy.	SLR ensures the solvency of the banks.

Question 5.
Write the meaning of Open market operations.
Answer:
The central bank starts the purchase and sale of Government securities in the money market. When the banks and private individuals purchase these securities they have to make payments for these securities to the Central Bank.

Question 6.
What is rationing of credit?
Answer:
This is the oldest method of credit control, it regulates and controls the purpose for which the credit is granted by commercial banks.

Question 7.
Mention the functions of agriculture credit department.
Answer:

To maintain expert staff to study all questions on agricultural credit.
To provide advice to Central and State Governments, State Co-operative banks and other banking activities.
To finance rural sectors in the business of agricultural credit and to co¬ordinate their activities.

Question 8.
Write the mechanism of credit creation by commercial banks.
Answer:
The power of commercial bank to create deposits through expanding their loans and advances is known as credit creation. It refers to bank loans and advances. As credit creation the banks make a net addition to the total supply of money in the economy. The banks have the power to expand or contract demand deposits through granting loans and advances and acquiring other assets.

Question 9.
Give a brief note on NBFI.
Answer:

It is a financial institution which does not have full banking license and it is not supervised by the central bank.
NBFI receive deposits and give loans. They mobilize people’s savings and use the funds to finance expenditure on investment activities.
NBFI operate in both the money and capital markets.

Question 10.
Bring out the methods of credit control.
Answer:
The two methods are:
(i) Quantitative
(ii) Qualitative

(i) (General) Quantitative credit control measures:
(a) Bank rate
(b) Open market operations
(c) Variable cash reserve ratio

(ii) (Selective) Qualitative credit control measures:
(a) Rationing of credit
(b) Direct action
(c) Moral suasion
(d) Publicity
(e) Regulation of consumer credit
(f) Marginal requirements.

Question 11.
What are the functions of NABARD?
Answer:
National bank for agriculture and rural development:

It plays an apex role from RBI with regard to agriculture credit
It acts as a re – financing institution for all kinds of production and investment. Credit to agriculture small scale and cottage industries to promote rural development.
It gives short – term loans to SCB, RRB and LDB.
It gives long – term loans to state government and to any institutions approved by Central Government.
It co-ordinates the activities of Central and State Governments and the Planning Commission.
It will inspect, RRB and Co-operative banks. It also promotes research on Agriculture and Rural Developments.

Question 12.
Specify the functions of IFCI.
Answer:
Industrial Finance Corporation of India provides assistance to the industrial concern.

It gives long-term loans in Indian and Foreign currencies.
Under writing of Equity, Preference and Debenture issues and also subscribing.
Guaranteeing the deferred payments in respect of machinery from India and abroad.
Guaranteeing of loans raised in foreign currency from foreign Financial Institutions.
It also provides Financial assistance on concessions for setting up industrial projects is less developed districts.

Question 13.
Distinguish between Money market and Capital market.
Answer:

Money market	Capital market
It’s a mechanism through which short term funds are loaned and borrowed.	It is a part of financial system which is concerned with raising capital and other long term investments.
It handles the purchase, sale and transfer of short term credit instruments. Institutions which require short term funds in the money market are commercial banks etc.,	The market where investment instruments like bonds, equities and mortgages are traded.

Question 14.
Mention the objectives of demonetisations.
Answer:
Objectives of Demonetisation:

Removing Black Money from the country
Shopping of corruption
Shopping terror funds
Curbing fake notes.

Question 15.
Explain the role of Commercial Banks in economic development.
Answer:
Role of commercial banks in Economic development:

(i) Capital formation:
The Economic development depends on the capital formation. Banks offer very attractive schemes to encourage the people to save their money.

(ii) Creation of credit:
To provide more funds for development projects, bank create credit which leads to increase in production, employment, sales etc.,

(iii) Channelizing the funds towards productive investment:
Banks invest its savings for productive purposes. The savings are allocated for various sectors to increase productivity and economic development.

(iv) Encouraging right type of industries:
The banks grant loans and advances to manufacturers, they in turn increase the productivity and industrialization helps to increase national income and economic development.

(v) Bank monetize debt:
Manufacturers cannot increase their sales without selling goods. But when they sell on credit basis, capital invested will be locked. As banks are lending money by discounting bill of exchange, business concerns are able to carry out the economic activities without any interruption.

(vi) Finance to the Government:
Government is acting as the promoter of industries in underdeveloped countries. Banks provide long-term credit to government by Government securities and short term finance by purchasing treasury bills.

(vii) Employment generation:
Banking industry has been widened by nationalization and creates new employment opportunities
.
(viii) Banks promote entrepreneurship:
Banks, by inducing new entrepreneurs to take up new well-formulated projects. They also . provide 100% credit. Thus commercial bank help for the development of the country.

Question 16.
Elucidate the functions of Commercial Banks.
Answer:
Functions of commercial banks:
→ Primary functions
→ Secondary functions .
→ Other functions

Primary Functions:
(a) Accepting deposits: Demand and time deposits
→ Demand deposits can be withdrawn without any prior notice to the bank by the individuals.
→ Time deposits are made for certain period of time. Banks pay higher interest.
(b) Advancing loans:
Commercial banks grant loans in the form of overdraft etc.

Secondary functions: Three categories.
Agency functions: Commercial banks are the agents for its customers.
(a) Collecting cheques: Commercial bank collect cheques and bills for exchange of their customers.
(b) Collecting income: They collect dividends, pensions, salaries etc., on behalf of their customers and a credit voucher is sent to customers.
(c) Paying expenses: Commercial banks make payments of telephone bills etc.

General Utility Functions: They are
(a) Providing locker facilities: Bank provides locker facilities for safe custody of jewels etc., of its customers.
(b) Issuing traveler’s cheques: To travel safely outside without any fear, bank issues travelers cheques.
(c) Dealing in foreign exchange: It helps by providing foreign exchange to businessmen who do exports and imports.

Transferring funds:
Transferring funds from one bank to another through draft, E-transfer etc.

Letter of credit:
Commercial banks issue letter of credit to customers to certify their credit worthiness.
(a) Underwriting securities: Due to the faith of customers, they buy securities underwritten by banks.
(b) Electronic Banking: It includes services, such as debit cards, credit cards, and Internet banking.

Other functions:
(a) Money supply: The commercial banks help to increase the money supply without printing additional money, the supply of money is increased.
(b) Credit creation: It is multiplication of loans and advances. The loans offered by banks are more than the deposits.
(c) Collections of statistics: The commercial banks publish and collect statistics relating to trade, commerce and industry. So they advice the public authorities and customers on financial matters.

Question 17.
Describe the functions of Reserve Bank of India.
Answer:
RBI is India’s Central Banking Institution which controls monetary policy of the Indian rupee.
(i) Monetary authority:
It controls the supply of money in the economy to stabilize exchange rate, maintain balance of payment, control inflation etc.

(ii) The issuer of currency:
RBI is the sole authority to issue currency and controls fake currency.

(iii) The issuer of Banking licenses:
All banks should obtain license from RBI according to section 22 of Banking Regulation Act.

(iv) Banker to the Government:
It provides short term credit and manages all issues of Government loans and also advices the Government on Financial subjects.

(v) Banker’s bank:
It provides loans, accepts deposits and rediscount the bills of banks.

(vi) Lender of the last resort:
The commercial banks borrow money from the RBI during the time of crisis with collateral securities.

(vii) Act as a clearing House:
For settlement of banking transactions, RBI manages 14 clearing houses to facilitate exchange instruments and processing of payment instructions.

(viii) Custodian of Foreign exchange reserves:
RBI acts as a custodian of FOREX. It buys and sells foreign currency to maintain the exchange rate of Indian rupee vs Foreign currencies.

(ix) Regulator of economy:
It monitors GDP. Inflation etc., and also controls the money supply in the system.

(x) Managing Government securities:
RBI administers investments in institutional when they invest minimum portions of their assets/liabilities in Government securities.

(xi) Regulator and supervisor of payment and settlement systems:
PSS Act gives authority to RBI for payment and settlement systems in the country.

(xii) Developmental role:
It gives quality banking system in India. It also provides a wide range of promotional functions to support National objectives. It also provides financial literacy.

(xiii) Publisher of monetary data and other data:
RBI collects and publishes all essential data regularly.

(xiv) Exchange manager and controller:
RBI is a Indian representative of IMF.

(xv) Banking Ombudsman scheme:
This was introduced in 1995. According to this scheme complains in any order can be filed on the decisions of the banks.

(xvi) Banking codes and Standards board:
The codes and standards are based on established global practices to measure the performance of the banks. RBI has set up Banking Codes and Standards Board of India (BCSBI).

Question 18.
What are the objectives of Monetary Policy? Explain.
Answer:
The monetary policy in developed economies has to serve the function of stabilization and maintaining proper equilibrium in the Economic system.

(i) Neutrality of money:
According to economists like Wicksteed and Robertson of Chief exponents of neutral money. According to them monetary authority should aim at neutrality of money in the economy.

(ii) Exchange rate stability:
This was the main objective. It is also known as “Expand currency and credit when gold is coming in, contract currency and credit when gold is going out”. Due to this exchange rate stability will be maintained.

(iii Price stability:
It is the main objective of monetary policy according to Keynes stable prices will repose public confidence. So there will be prosperity and welfare in the community.

(iv) Full employment:
It is the main goal of monetary policy, because unemployment is dangerous economically wasteful.

(v) Economic growth:
Economic growth is the process whereby the real Per Capita Income of a country increases over a long period of time. So Monetary policy should promote sustained Economic growth.

(vi) Equilibrium in the balance of payments:
During post war years this became significant. Increasing of deficit in the balance of payments reduces the ability of an economy to achieve other objectives. So monetary authority makes efforts maintain equilibrium in the Balance of payments.

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 institutions 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 market approval
(d) Finance 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:
(aj 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 his 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) IOnternet banking
(c) RTGS
(d) NEFT
Answer:
(b) IOnternet 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

Samacheer Kalvi 12th Economics Notes Chapter 6 Banking

→ Demand deposits: It is the deposit that can be withdrawn by individuals without any notice to the bank.

→ Letter of credit: Commercial banks issue letter of credit to their customers to certify their credit worthiness.

→ Primary deposit: When customer gives cash to the bank and the bank creates a book debt in his name called a deposit.

→ Time deposits: Deposits made for certain period of time.

→ E-Banking – Electronic banking: The services such as debit cards, credit cards and internet banking.

→ Trancter’s cheques: Cheques issued for travelling outside the country.

→ Banking Ombudsman scheme: Introduced in 1995. The complaints can appeal to the Ombudsman against the decisions of bank.

→ Moral Suasion: RBI gives advice, request and asks commercial banks to co-operate with RBI.

→Paying expenses: Commercial banks make the payments of various obligation of customers such as telephone bills etc.,

→ Money supply: Important function of commercial banks to increase the supply of money.

→ Banking: “Commercial Banks are the institutions that make short term loans to business and in the process create money ” – Culbertson

→ Commercial banks: Commercial banks can be described as a financial institutions, that offers basic investment products like savings account.

→ Role of banks in economic development:
“An organization whose principal operations are concerned with the accumulations of the temporarily idle money of the general public for the purpose of advancing to others for expenditure”. – KENT

→ Central bank:
(i) “Banking system in which a single bank has either complete Control or a residuary monopoly of note issue ” – Smith
(ii) H.A. Shaw defines central bank as “ Bank which controls credit Monetary policy: It is the macro economic policy laid down by the central bank – It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macro economic objectives like inflation, consumption, growth and liquidity.

→ NBFI – Non-Banking Financial Institution

→ UTI – Unit Trust of India

→ RBI – Reserve Bank of India (Central bank)

→ FOREX – Foreign Exchange Reserves

→ FEMA – Foreign Exchange Management Act

→ PSS Act – The Payment and Settlement Systems Act

→ IMF – International Monetary Fund

→ CR – Cash Reserve Ratio

→ SLR – Statutory Liquidity Ratio

→ RR – Repo Rate

→ RRR – Reserve Repo Rate

→ ARDC – The Agricultural Refinance Development Corporation

→ RRB – Regional Rural Bank

→ NABARD – National Bank for Agriculture and Rural Development

→ GOI – Government of India

→ CBD – Central Board Directors

→ IFCI – Industrial Finance Corporation of India

→ ICICI – Industrial Credit and Investment Corporation of India

→ IDBI – Industrial Development Bank of India

→ SFC – State Financial Corporations

→ SIDS – State Industrial Development Corporation

→ BCSBI – Banking Codes and Standards board of India

→ IFCI – Industrial Finance Corporation India

→ IDBI – Industrial Development Bank of India

→ SFC – State Financial Corporation

→ SIDCO – State Industrial Development Corporation

→ NEFT – National Electronic Fund Transfer

→ RTG – Real Time Gross Settlement

→ ATM – Automated Teller Machine

TN Board 12th Economics Important Questions

TN Board 12th Economics Important Questions Chapter 5 Monetary Economics

November 6, 2021

TN State Board 12th Economics Important Questions Chapter 5 Monetary Economics

Question 1.
Define Money.
Answer:
“Money is, what money does” – Walker.
“Money can be anything that is generally acceptable as a means of exchange and at the same time act as a measure and on store of value” – Crowther.

Question 2.
What is barter?
Answer:
Commodities and services were directly exchanged for another commodities and services.

Question 3.
What is commodity money?
Answer:
It is the value from the commodity by which it is made. Commodity money has value in itself and value in its use of money.

Question 4.
What is gold standard?
Answer:
Gold Standard is a system in which the standard currency (the value of money) is directly linked with Gold.

Question 5.
What is plastic money? Give example.
Answer:
It is advanced forms of Financial Products. It is an alternative to cash. They aim at removing the need for carrying cash to make transactions. Eg: Cash Cards, Credit-Cards, Debit Cards etc.

Question 6.
Define inflation.
Answer:
“To much of money chasing too few goods” – Coulboum.
“A state of abnormal increase in the quality of purchasing power” – Gregorye.

Question 7.
What is Stagflation?
Answer:
Stagflation is a combination of stagnant Economic growth, high Employment and high Inflation.

Question 8.
Write a note on metallic money.
Answer:

Metallic standard is a premier one after the introduction of modem money system.
In metallic standard metals like good or silver is used to determine the standard value of the money and currency.
Standard coins made out of the metal used under metallic standard.
The face value of metal money is equal to the intrinsic metal value.

Question 9.
What is money supply?
Answer:

The total amount of money in an economy is known as money supply.
It is the amount of money which is in circulation in an economy at any given time.
Money supply plays an very important role in determining the price level and interest rate.

Question 10.
What are the determinants of money supply?
Answer:
(i) Currency Deposit Ratio (CDR):
The ratio of money held by the public in currency to that they hold in back deposits.

(ii) Reserve Deposit Ratio (RDR):
RM consists of (a) Vault Cash in Banks (b) Deposits of Commercial Banks with RBI.

(iii) Cash Reserve Ratio (CRR):
It is the fraction of deposits the Commercial Bank must have with RBI.

(iv) Statutory Liquidity Ratio (SLR):
It is the fraction of the total demand and time deposits of the commercial banks in the form of specified liquid Assets.

Question 11.
Write the types of inflation.
Answer:
There are four types of inflation.

(i) Creeping Inflation:
This inflation is very mild and not dangerous to the economy, it will spread over a long period its also known as mild or moderate inflation

(ii) Walking Inflation:
Moderate price rice and when annual inflation rate is a single digit, then its called as walking or trolling inflation

(iii) Running Inflation:
When the price increases like a running of horse at a speed of 10-20% per annum its called as running inflation

(iv) Galloping Inflation:
The unmanagable high inflation. The inflation rates will run into 2 or 3 digits. The percentage will be from 20 to 100 %.

Question 12.
Explain Demand-pull and Cost push inflation.
Answer:
Demand-Pull Inflation:
At all points of time in the Economy, the demand and supply play an important role.
Eg: Where the is more demand and supply is less, the price of the product increases.

Cost-Push Inflation:
When the cost of the raw material and the input increases, this inflation occur. Increase in wages paid to the labour also leads to Inflation.

Question 13.
State Cambridge equations of value of money.
Answer:
(Cash Balance Approach)
The Marshall Equation is M = KPY
M – Quality of money
Y – Aggregate real income of the community
P – Purchasing power of money
K – Fraction of real Income Public desires to hold in the form of money.
The Price level
P – M/KY or The value of money (The reciprocal of price level) is
1/P = KY/M

According to Cambridge Equation, the value of money:
Dividing the total quality of goods which the public desires to hold out of the Total Income by Total Supply of Money.
According to Marshall’s Equation, The value of money is influenced not only by changes in M, but also changes in K.

Keynes Equation:
n = pk or p = n/k Where,
n = Total supply of money,
p = general price level of consumption goods,
k = total consumption units people decide to keep as cash.
Keynes says k is a real balance, because it is measured in terms of consumer goods.

According to Keynes, people’s desire to hold money is unaltered by Monetary authority. So price level and value of money can be stablised through regulating quantity of money (n) by Monetary Authority.

Question 14.
Explain disinflation.
Answer:
Disinflation is the slowing down the rate of inflation by controlling the amount of credit.
Eg: Bank Loan, hire purchase available to consumers without causing more unemployment.

Definition of Disinflation:
Disinflation may be defined as the process of revesing Inflation without creating unemployment or reducing output in the Economy.

Question 15.
Illustrate Fisher’s Quantity theory of money.
Answer:
This theory explains the relationship between Quality of money and value of money.
Fisher’s Theory:
He gave a quantitative form in terms of his famous “Equation of Exchange”
MV = PT
The total quantity of money (MV)
Will be equal to
The total value of all goods and services bought and sold (PT)
MV = PT
Supply of Money = Demand for Money (Cash Transaction Equation)
M = Money Supply/Quantity of Money
V = Velocity of Money
P = Price Level
T = Volume of Transaction

P = MV/T
[Note: That is Quantity of money determines the price level and price level values directly with the quantity of money, but provided ‘V’ and ‘T’ remain constant]
Extended Equation of Exchange by Fisher He included Bank deposits M, and its Velocity V’
PT = MV + M’V’
P = MV = MV + M’V’

The price level is determined by:
(i) Quantity of money incirculation ‘M’
(ii) The Velocity of incirculation of money ‘ V’
(iii) The Volume of Bank credit money M1
(iv) The Velocity of circulation of credit money V, and the volume of Trade (T)

TN Board 12th Economics Important Questions Chapter 5 Monetary Economics 1

Diagramatic Illustration:
(i) Figure (a) shows the effect of changes in the Quantity of money on the price level. When Quantity of money is OM, the price level is OP.
(ii) When the quantity of money is doubled to OM₂, the price level is also doubled to OP₂.
(iii) When the quantity of money is increased to OM₄ the price level also increases to OP₂.
(iv) This is expressed by the curve OP = f (M) from the origin at 45°.
(v) Figure (b) – It gives the inverse relationship between Quantity and Value of money. Value of money on vertical axis and Quantity of money OM, on Horizontal axis, when value of money.
(vi) Is OI/P, the quantity of money is doubled OM₂.
(vii) When the value of money becomes \(1 \frac{1}{2} \frac{\mathrm{OI}}{\mathrm{P}_{2}}\) then quantity increases by 4 fold OM₄.
(viii) When value of money is reduced by OI/P₄, then the inverse relationship between the quantity and value of money is shown by downward sloping curve OI/P = f (M).

Question 16.
Explain the functions of money.
Answer:
Primary Function:
(i) Money as a medium of exchange:
It is a basic function of money. It is accepted by all and all exchanges takes place in terms of money. Money is obtained through sales and purchases.

(ii) Money as a Measure Value:
Prices of all goods and services are expressed in terms of money. It is a collective measure value. So it is easier to determine the rate of exchange between various goods.

Secondary Functions:
(i) Money as Store Value:
The invention of money made storage easy. It is a store of wealth and it can be easily converted into other marketable assets like land, machinery etc.

(ii) Money as a Standard of Deferred Payments:
In the modem Economy due to invention of money borrowing and rending process are made easy because money act as a standard of deferred payments (Cheques).

(iii) Money as a Means of Transferring Purchasing Power:
The exchange of goods are made easy due to the Transfer of purchasing power of money from one place to another.

Contingent Functions:
(i) Basis of Credit System:
Business transactions are done on the basis of credit system. Money is at the back of all credit.

(ii) Money facilitate distribution of National Income:
Due to the invention of money, the distribution of money as rent, wages and profit are made easy.

(iii) Money helps to Equalize Marginal utilities and Marginal Productivities:
Equalising marginal utilities have become easy because the prices of all commodities are expressed in money.

(iv) Money Increases productivity of capital:
Capital in the form of money can be put to any use. It can be transferred from less to more productive use.

Other Functions:
(i) Money helps to maintain Repayment Capacity:
To Maintain repayment capacity banks and Insurance and Governments have to keep some liquid each to maintain repayment capacity.,

(ii) Money represents Generalised Purchasing Power:
Purchasing power kept in terms of money can be put to any use.

(iii) Money gives Liquidity to capital:
Money is the most liquid form of capital. It can be put to any use.

Question 17.
What are the causes and effects of inflation on the economy?
Answer:
Causes:
(i) Increase in Money Supply: Inflation is caused by an increase in supply and increases aggregate demand.
(ii) Increase in Disposable Income: Disposable income increases National Income and reduction of taxes.
(iii) Increase in Public Expenditure: Government activities like welfare programmes are expanding it also cause increase in price.
(iv) Increase in consumer spending: The demand for goods and services increases on hire purchases.
(v) Cheap Money Policy: This leads to increase in money supply and demand.
(vi) Deficit Financing: Borrowing from public by the Government due to this aggregate demand and supply increases and rise in price.
(vii) Black assets, activities and Money: The Black money increases Aggregate demand because people spend that money lavishly. But supply of goods are reduced.
(viii) Repayment of Public Debt: When the government repay the past debt to public, money supply with the public increases.
(ix) Increase in Exports: When exports are encouraged, domestic supply of goods and services increases.

Effects of Inflation:

Effects of Production:
When resources are not fully utilised, the profit induces business class to
increase their investments in production.
(i) Hyper-inflation results in depreciation of value of money.
(ii) When value of money depreciate, foreign capital reduces.
(iii) With the reduced capital, investment setbacks will discourage entrepreneurs.
(iv) Inflation leads to hoarding of essential goods.
(v) Inflation encourages investment in speculative activities.

Effects on Distribution:
(i) Debtors and Creditors: During inflation debtors gain and creditors lose because of high purchasing power of money.
(ii) Fixed-Income groups: The Fixed Income groups are worst hit during Inflation.
(iii) Entrepreneurs: Inflation is a boon to the entrepreneurs like Traders, merchants.
(iv) Investors: Those who invest in Fixed interest lose during inflation but who invest on shares gain by rich dividend.

Question 18.
Describe the phases of Trade cycle.
Answer:
There are four different Phases of Trade Cycle.
(i) Boom or Prosperity Phase:
Movement of Economy beyond full employment is called boom phase during this phase profits increase, interest rate group. The Demand for bank credit increases.

TN Board 12th Economics Important Questions Chapter 5 Monetary Economics 2

(ii) Recession:
The turning point from boom is called recession. Failure of a company or bank brings this phase. Investments are reduced and production comes down income and profit decline panic in stock market and money market becomes tight.

(iii) Depression:
The Level of Economic activity becomes low. Firms will close because of losses and it will result in unemployment. Agriculture will decline. It is a worst phase of business cycle. Extreme depression is called as ‘Trough’.

(iv) Recovery:
After depression, its recovery. It brings the demand for capital goods and Autonomous investment, the demand slowly increases. Recovery may be initiated by investment by government Expenditure.

Multiple Choice Questions:

Question 1.
The RBI Headquarters is located at:
(a) Delhi
(b) Chennai
(c) Mumbai
(d) Bengaluru
Answer:
(c) Mumbai

Question 2.
Money is:
(a) acceptable only when it has intrinsic value
(b) constant in purchasing power
(c) the most liquid of all assets
(d) needed for allocation of resources
Answer:
(c) the most liquid of all assets

Question 3.
Paper currency system is managed by the:
(a) Central Monetary authority
(b) State Government
(c) Central Government
(d) Banks
Answer:
(a) Central Monetary authority

Question 4.
The basic distinction between M₁ and M₂ is with regard to:
(a) post office deposits
(b) time deposits of banks
(c) saving deposits of banks
(d) currency
Answer:
(b) time deposits of banks

Question 5.
Irving Fisher’s Quantity Theory of Money was popularized in:
(a) 1908
(b) 1910
(c) 1911
(d) 1914
Answer:
(c) 1911

Question 6.
MV stands for:
(a) demand for money
(b) supply of legal tender money
(c) Supply of bank money
(d) Total supply of money
Answer:
(b) supply of legal tender money

Question 7.
Inflation means:
(a) Prices are rising
(b) Prices are falling
(c) Value of money is increasing
(d) Prices are remaining the same
Answer:
(a) Prices are rising

Question 8.
______ inflation results in a serious depreciation of the value of money.
(a) Creeping
(b) Walking
(c) running
(d) Hyper
Answer:
(d) Hyper

Question 9.
________ inflation occurs when gengeneral prices of commodities increases due
(a) Cost-push
(b) demand pull
(c) running
(d) galloping
Answer:
(a) Cost-push

Question 10.
During inflation, who are the gainers?
(a) Debtors
(b) Creditors
(c) Wage and salary earners
(d) Government
Answer:
(a) Debtors

Question 11.
_______ is a decrease in the rate of inflation.
(a) Disinflation
(b) Deflation
(c) Stagflation
(d) Depression
Answer:
(a) Disinflation

Question 12.
Stagflation combines the rate of inflation with:
(a) Stagnation
(b) employment
(c) output
(d) price
Answer:
(a) Stagnation

Question 13.
The study of alternating fluctuations in business activity is referred to in Economics as:
(a) Boom
(b) Recession
(c) Recovery
(d) Trade cycle
Answer:
(d) Trade cycle

Question 14.
During depression the level of economic activity becomes extremely:
(a) high
(b) bad
(c) low
(d) good
Answer:
(c) low

Question 15.
“Money can be anything that is generally acceptable as a means of exchange and that the same time acts as a measure and a store of value”. This definition was given by:
(a) Crowther
(b) A.C.Pigou
(c) F.A.Walker
(d) Francis Bacon
Answer:
(a) Crowther

Question 16.
Debit card is an example of:
(a) currency
(b) paper currency
(c) plastic money
(d) money
Answer:
(c) plastic money

Question 17.
Fisher’s Quantity Theory of money is based on the essential function of money as:
(a) measure of value
(b) store of value
(c) medium of exchange
(d) standard of deferred payment
Answer:
(c) medium of exchange

Question 18.
V in MV = PT equation stands for:
(a) Volume of trade
(b) Velocity of circulation of money
(c) Volume of transaction
(d) Volume of bank and credit money
Answer:
(b) Velocity of circulation of money

Question 19.
When prices rise slowly, we call it:
(a) galloping inflation
(b) mild inflation
(c) hyper inflation
(d) deflation
Answer:
(b) mild inflation

Question 20.
_________ inflation is in no way dangerous to the economy.
(a) walking
(b) running
(c) creeping
(d) galloping
Answer:
(c) creeping

Samacheer Kalvi 12th Economics Notes Chapter 5 Monetary Economics

→ Broad Money: It is post office savings plus time deposits with commercial and co-operative banks excluding inter bank time deposits.

→ Cost-Push Inflation: General price level increases in the cost of wages and raw materials.

→ Contingent Functions: Making use of money as cheques.

→ Demand-Pull Inflation: Inflation due to excess demand.

→ Dead Money: A situation in which money or loans are very difficult to obtain in a given country, the rate of Interest rate to be pushed up due to the forces of demand and supply.

→ Call Money: Low rate of Interest and paid back at short notice.

→ Cheap Money: The maintenance of low interest rate during a period of depression to encourage investment.

→ Galloping Inflation: Very rapid Inflation.

→ Inflationary Gap: “An excess of anticipated of expenditure over available output at base prices”.

→ Monetary Policy: Control of Central Bank on money supply to Influence Economy.

→ Over Draft: A negative balance in a Bank account and customer owes the money to the Bank.

→ Purchasing Power Parity: An exchange rate between two currencies, that same amount of products can be bought for same amount in each country if the cost were converted at that exchange rate.

→ Definitions of Money:
Many economists developed definition for money. Among these, definitions of Walker and Crowther are given below:
“ Money is, what money does ” – Walker.
“Money can be anything that is generally acceptable as a means of exchange and at the same time acts as a measure and a store of value”. – Crowther.

→ Definition of Inflation:
“7oo much of Money chasing too few goods” – Coulboum.
“A state if abnormal decrease in the quantity ofpurchasing power” – Gregorye.

→ Definition of Trade Cycle:
“A trade cycle is composed ofperiods of good trade characerised by rising prices and low unemployment percentages. altering with periods of bad trade characterised by falling prices and high unemployment percentages ” – J.M. Keynes

→ Definition of Marshall’s Value of Money:
According to Marshall’s equation, the value of money is influenced not only by changes in M, but also by changes in K. where,
M – Quantity of money
K – The fraction of the real income which the public desires to hold in the form of money.

→ General Equation of Fisher MV = PT
i. e. Supply of Money = Demand for Money.

→ Revised Equation of Fisher
PT = MV + M’V’
P = MV + M’V’

→ Marshall’s Equation,
(i) M = KPY
(ii) Keynes Equation n = pk (or) p = n/k
(iii) Extended Equation of Keynes n = p(k + rk’) or p = n/(k + rK’)

TN Board 12th Economics Important Questions

TN Board 12th Economics Important Questions Chapter 4 Consumption and Investment Functions

November 5, 2021

TN State Board 12th Economics Important Questions Chapter 4 Consumption and Investment Functions

Question 1.
What is Consumption function?
Answer:
The consumption function is the functional relationship between consumption expenditure and the National income = C = f(Y), C = Consumption, Y = Income, f = Function.

Question 2.
What do you mean by Propensity to Consume?
Answer:
Propensity to consume income and consumption relationship, that is when Income increases, consumption also increases.

Question 3.
Define Average Propensity to Consume (APC).
Answer:
“It is the ratio of consumption expenditure to any particular level of income”.
APC = C / Y
Where C = Consumption and Y = Income

Question 4.
Define Marginal Propensity to Consume (MPC).
Answer:
“It is the ratio of change in the consumption to change in income”
MPC = ∆C/∆Y
Where ∆C = change in consumption
∆Y = change in income
MPC is positive but less than unity.

Question 5.
What do you mean by Propensity to Save?
Answer:
It is the proportion of total income or increase in income that consumers save rather than spend on consumption.

Question 6.
Define Average Propensity to Save (APS).
Answer:
APS is the quotient obtained by dividing the total saving by the total income. It is the ratio of total savings to total income. It can be expressed in the form of APS = S/Y Where S = savings Y= income

Question 7.
Define Marginal Propensity to Save (MPS).
Answer:
It is the ratio of change in saving to a change in income MPS = ∆S / ∆Y
∆S = change in saving
∆Y = change in income
MPC + MPS =1
MPS = 1 – MPC and MPC = 1 – MPS

Question 8.
Define Multiplier.
Answer:
Multiplier is defined as the ratio of the change in National income to change in income
K = ∆Y / ∆I
Where K = multiplexer
∆I = Increase in investment
∆Y = Resultant increase in income

Question 9.
Define Accelerator.
Answer:
It is the numerical value of the relation between an increase in consumption and the resulting increase in investment.
Accelerator β = ∆I / ∆C
∆I = change in investment outlays
∆C = change in consumption demand.

Question 10.
State the propositions of Keynes’s Psychological Law of Consumption.
Answer:

When income increases, consumption expenditure also increases but by a smaller amount.
The increased income will be divided in some proportion between consumption expenditure and saving.
Increase in income always leads to an increase in both consumption and saving.

Question 11.
Differentiate autonomous and induced investment.
Answer:

Autonomous investment	Induced investment
It is independent	Planned
Income is inelastic	Income is elastic
Welfare motive	Profit motive
The curve is horizontal parallel to x axis	It is positively sloped

Question 12.
Explain any three subjective and objective factors influencing the consumption function.
Answer:
Subjective and Objective factors influencing the consumption function are:

Subjective factor	Objective factor
The motive of precaution	Income distribution
The motive of foresight	Price level
The motive of calculation	Wage level
The motive of improvement	Interest rate
The motive of financial independence	Fiscal policy
The motive of enterprise	Consumer credit
The motive of pride	Demographic factors
The motive of avarice	Duesenberry hypothesis

Question 13.
Mention the differences between accelerator and multiplier effect.
Answer:

Accelerator	Multiplier
The numerical value of the relation between an increase in consumption and the resulting increase in investment.	It is the ratio of the change in National income to change in investment.
Accelerator p = ∆I / ∆C	Multiplier K = ∆Y / ∆I

Question 14.
State the concept of super multiplier.
Answer:
The super multiplier is worked out by combining both induced consumption and induced investment. It is greater than simple multiplier. It is K and P interaction. J.R.Hicks has combined mathematically K and P and given the name of super multiplier.

Question 15.
Specify the limitations of the multiplier.
Answer:

The assumption of constant capital output ratio is unrealistic.
Resources are available only before full employment.
Excess capacity is capital goods industries is assumed.
Accelerator will work only if the increased demand in permanent.
Accelerator will work only when credit is available easily.
If there is unused or excess capacity is the consumer goods industry, the accelerator principle would not work.

Question 16.
Explain Keynes psychological law of consumption function with diagram.
Answer:
This law of consumption which forms the basis of the consumption function. This law Implies that there is a tendency on the part of the people to spend in consumption less than the full increment of income.

Assumptions:

Ceteris paribus: The other variable like tastes, habits etc., do not change.
Existence of normal conditions: The law holds goods under normal conditions.
Existence of a Laissez-Faire Capitalist: This law operates in a rich capitalist economy where there is no government interventions.

Propositions to the law:

Consumption expenditure increases in a smaller amount when the income increases.
The increased income will be divided in some proportion between consumption, expenditure and saving.
Consumption and savings increases when income increases.

Three proportions of the law:

TN Board 12th Economics Important Questions Chapter 4 Consumption and Investment Functions 1

(i) 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.

(ii) Proposition (2):
When income increases to 180 and 240, it divided between consumption by 170 and 220 by the saving by 10 and 20.

(iii) Proposition(3): Increases in income to 180 and 240 lead to increased consumption 170 and 220 and increased saving 20 and 10 than before.

Question 17.
Briefly explain the subjective and objective factors of consumption function.
Answer:

TN Board 12th Economics Important Questions Chapter 4 Consumption and Investment Functions 2

Question 18.
Illustrate the working of Multiplier.
Answer:
Working of multiplier – Numerical example:
(i) Investment expenditure undertaken by government is ₹ 100cr (on public work). It is from wages prices of material etc.,
(ii) So income of labourers and suppliers of materials increases by ₹ 100 cr.
(iii) If the marginal propensity to consume is 0.8 that is 80%.
(iv) (A sum of ₹ 80cr is spent on consumption and a sum of ₹ 20cr is saved).

On these basis:
(i) Suppliers of goods get an income of ₹ 80cr
(ii) They spent (80% on ₹ 80cr) ₹ 64cr
(iii) The consumption expenditure and income gives a chain reaction.
The final results is ∆Y = 100 + 100 × 4/5 +100 × [4/5]2 + 100 × [4/5]3or,
∆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 – 4 / 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 19.
Explain the operation of the Accelerator.
Answer:
(i) To produce 1000 consumer goods 100 machines are required and the life of machine is 10 years, (that is for every 10 years, the machine has to be replaced to maintain to produce 1000 consumer goods). This is called a Replacement Demand.
(ii) If the demand for consumer increases by 10% [ 1000 to 1100] is that case 10 more machines
are needed and the total demand for machines becomes [10 + 10 = 20 ] that is 10 for replacement and 10 for meeting the increased demand.

Note: [The important aspect is 10% increase in demand for consumer goods causes a 100% increase for machines from 10 to 20 No. of machines].

The result derived is:
Even a small change is demand for consumer goods will lead to a big change in investment.

TN Board 12th Economics Important Questions Chapter 4 Consumption and Investment Functions 3

Explanation of accelerator:
→ SS is the saving curve(SS).
→ II is the investment curve (II).
→ A is the point E₁ the economy is in equilibrium with OY₁, income [OY₁].
→ Saving and investment are equal at OI₂.
→ When investment is increased from OI₂ to OI₄, the income also increases from OY, to OY₃ and the equilibrium point is E₃.
→ If the increase in investment by I₂I₄ is purely exogenous, then the increase in income by Y₁ and Y₃ would have been due to multiplier effect.
→ According to this diagram, it is assumed that exogeneous investment is only by I₂I₃ and induced investment is by I₃I₄.
→ To conclude, the increase in income by Y₁ Y₃ is due to the multiplier effect and.
→ The increase in income by Y₂Y₃ is due to the accelerator effect.

Question 20.
What are the differences between MEC and MEI?
Answer:

Marginal Efliciency of Capital(MEC)	Marginal Efficiency of Investment(MEI)
It is based on a given supply price for capital.	It is based on the induced change in the price due to change in the demand for capital..
It represents the rate of return on all successive units of capital without regard to existing capital.	It shows the rate of return on just those units of capital over and above the existing capital stock.
The capital stock is taken on the X axis of diagram.	The amount of investment is taken on the X – axis of diagram.
It is a “stock” concept.	It is a “flow” concept.
It determines the optimum capital stock in an economy at each level of interest rate.	It determines the net investment of the economy at each interest rate given the capital stock.

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 ₹ 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 + 0.8Y then, when disposable income is ₹ 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.
If 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

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

→ Ceteris paribus: All other things remaining equal.

→ Extraneous: Calculation of the value of a function outside the range of known values.

→ Hyper inflation: Very rapid inflation, monetary authorities will lose control over the situation.

→ Averice: Miserly instinct.

→ Windfall gains or losses: Unexpected changes in the stock market.

→ Investment multiplier: Refers to the multiple increase in income due to a given increase in investment.

→ The minimum value of multiplier: It is one (1) and maximum value is infinity.

→ Ex-ante: Intended or planned

→ Ex-post: Actual or realised

→ Break eveb point: The point at which the volume of sales yields revenue equal to the entire fixed and variable cost. At this point profit is zero.

→ CF – Consumption function

→ AC – Autonomous Consumption

→ APC – Average Propensity to Consume

→ APS – Average Propensity to Save

→ MPC – Marginal Propensity to Consume

→ MPS – Marginal Propensity to Save

→ Y – Income, C – Consumption, S – Savings,

→ Investment function:
I = f(R)
I – Investment (dependent variable)
R – Rate of interest (independent variable)

→ MEC – Marginal Efficiency of Capital

→ MEI Marginal Efficiency of Investment

→ Consumption function symbolically C = f(Y).
C – Consumption, Y – Income,f- Function

→ Marginal propensity to consume = \(\frac{\Delta \mathrm{C}}{\Delta \mathrm{Y}}\)

→ Average propensity to consume = \(\frac{C}{Y}\)

→ Average propensity to save = \(\frac{\mathrm{S}}{\mathrm{Y}}\)

→ Marginal propensity to save = \(\frac{\Delta \mathrm{S}}{\Delta \mathrm{Y}}\)

→ Multiplier K = \(\frac{\Delta \mathrm{Y}}{\Delta \mathrm{I}}\) (or)
K = \(\frac{1}{1}\) – MPC (or) \(\frac{1}{\text { MPS }}\)

→ Accelerator Effect β = \(\frac{\Delta I}{\Delta C}\)

→ Leverage Effect Y = C + I_A + I_p

TN Board 12th Economics Important Questions

TN Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income

November 5, 2021

TN State Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income

Question 1.
Define full employment.
Answer:
Full employment refers to a situation in which every able person willing to work at the prevailing wage rate is employed or that person who are willing to work and able to work must have employment.

Question 2.
What is the main feature of rural unemployment?
Answer:
Main feature of rural unemployment – The major feature of rural unemployment is the existence of unemployment in the form of disguised unemployment and seasonal unemployment.

Question 3.
Give short note onfrictional unemployment.
Answer:
It is also known as Temporary unemployment. It occurs because of the imbalance between the demand and supply of labour. It is also because of immobility of labour, lack of skills, shortages of raw materials and break down of machineries.

Question 4.
Give reasons for labour retrenchment at present situation.
Answer:
In recent years new techniques are- adopted. Modem technology introduces inventions and innovations. Due to technical improvements, the need for labourers becomes less and the existing workers are retrenched.

Question 5.
List out the assumptions of Say’s law.
Answer:

The price cannot be affected by single seller, buyer of commodity.
There is full employment.
No single buyer or seller of commodity or an input can affect price.
Full employment.
People are motivated by self interest and self – interest determines economic decisions.
The laissez faire policy is essential for an automatic and self adjusting process of full employment equilibrium. Market forces determine everything right.
There will be a perfect competition in labour and product market.
There is wage-price flexibility.
Money acts only as a medium of exchange.
Long – run analysis.
There is no possibility for over production or unemployment.

Question 6.
What is effective demand?
Question
It is the money spent actually on products of industry by the people.

Question 7.
What are the components of aggregate supply?
Answer:

Aggregate (desired) consumption expenditure (C)
Aggregate (desired) private savings (S)
Net Tax payments (T) –
Personal (desired) transfer payments to the foreigners (Rf)
Aggregate supply =C + S + T + Rf = Aggregate income generated in the economy.

Question 8.
Explain the following in short:
(i) Seasonal unemployment,
(ii) Frictional unemployment,
(iii) Educated unemployment.
Answer:
(i) Seasonal unemployment:
Unemployment during seasons. People are unemployed during off season. Seasonal unemployment happens from demand side.
Eg: Ice cream industry, holiday resorts etc., it is common in agriculture and agro based industries.

(ii) Frictional unemployment:
It is due to imbalance between supply and demand of labour. Eg: people who lose their job in search of new jobs.

(iii) Educated unemployment:
When the qualification of the people do not match with their job, educational system, lack of technical skills, mass student turn out, preference for white collar job are responsible for educated unemployment.

Question 9.
According to classical theory of employment, how wage reduction solve the problem of unemployment diagramatically explain.
Answer:
According to Classical Economist, full employment condition can be achieved by cutting down the wage rate unemployment would be eliminated when wages are determined by the mechanism of Economy itself.

TN Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income 1

Explanation of the Diagram:

When the wage rate is OW, then employment is ON.
As the wage rate is reduced to OW, then the employment has increased to ON.
According to A.C. Pigou, this theory has a base for developing the solution of unemployment problem.
The condition of unemployment cannot exist in normal economic conditions.
This is because as the unemployment arises, wages would fall. In such a case, organisations would prefer to hire new employees, which would result in eliminating unemployment.
“The law also assumes that there should neither be any intervention of government to regulate the rate of wages nor any role of trade unions.”
According to Say’s law, the condition of unemployment exists only under some specific conditions. But this condition is momentary.

Question 10.
Write short note on the implications of Say’s law.
Answer:

Over production or unemployment is not possible.
The unutilized resources are employed when factors accept rewards according to their productivity under full employment.
No government intervention due to automatic price mechanism in the economy.
Equality between savings and investment due to flexibility in interest
Money serves as a medium of exchange only because people will not hold idle money.

Question 11.
Explain Keynes’ theory in the form of flow chart.
Answer:

TN Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income 2

Question 12.
What do you mean by aggregate demand ? Mention its components.
Answer:
The aggregate demand is the amount of money which entrepreneurs expect to get by selling the output produced by the number, of labourers employed. So it is the expected income or revenue from the sale of output at different levels of employment.
Four components of aggregate demand

Consumption demand
Investment demand
Government expenditure and
Net export (Export – Import)

Question 13.
Explain about aggregate supply with the help of diagram.
Answer:
Aggregate supply is the value of total output of goods and services produced in a year. It is equal to the value of national product i.e., National income. It is the required amount of labourers and materials to produce the necessary output.
Aggregate supply = C + S + T + Rf = Aggregate income generated in the economy.

TN Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income 3

Explanation of the Diagram:
Aggregate supply curves are drawn for the assumption of fixed money wages and variable wages.
Z curve is Linear and money wages are fixed, curve is non-linear, wage rate increases with employment. When full employment level of Nf is reached, it is impossible to increase output by employing more men. So aggregate supply curve becomes inelastic. (Vertical straight line)

Question 14.
Write any five differences between classicim and Keynesianism.
Answer:

TN Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income 4

Question 15.
Describe the types of unemployment.
an:
In the developing countries like India, the nature of unemployment is different.
(i) Cyclical unemployment:
It occurs during die (town phase -of trade cycle that is during the period of recession and depression income ami output fall leading to widespread unemployment It can be cured by public investment.

(ii) Seasonal unemployment:
Unemployment during seasons. People are . unemployed during off season. Seasonal unemployment happens fromm demand side.
Eg: Ice cream industry, holiday resorts etc., it is common in agriculture and agro based industries.

(iii) Frictional unemployment:
It is due to imbalance between supply and demand of labour. Eg: people who lose their job in search of new jobs.

(iv) Educated unemployment:
When the qualification of the people do not match with their job, educational system, lack of technical skills, mass student turn out, preference for white collar job are responsible for educated unemployment.

(v) Technical unemployment:
In recent years new techniques are adopted. Modem technology introduces inventions and innovations. Due to technical improvements, the need for labourers becomes less and the existing workers are retrenched.

(vi) Structural unemployment:
It is due to the drastic change in the structure of the society. This unemployment is due to lack of demand for the product or shift in demand.

(vii) Disguised unemployment:
This type of unemployment occurs in agriculture. A person is said to be disguisedly unemployed if his contribution to output is less than what he can produce by working for normal hours per day.

Question 16.
Critically explain Say’s law of market.
Answer:
It is the core of classical theory of employment J.B. say enunciated the proposition that “ supply creates its own demand”. Hence there cannot be general over production or the problem of unemployment in the economy. According to say “ when goods are produced by firms in the economy, they pay reward to the factors of production. So each product produced in the economy creates demand equal to its value in the market”.

TN Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income 5

Assumptions of the Say’s law of market:

The price cannot be affected by single seller, buyer of commodity.
There is full employment.
No single buyer or seller of commodity or an input can affect price.
Full employment.
People are motivated by self interest and self-interest determines economic decisions.
The laissez faire policy is essential for an automatic and self adjusting process of full employment equilibrium. Market forces determine everything right.
There will be a perfect, competition in labour and product market.
There is wage-price flexibility.
Money acts only as a medium of exchange.
Long – run analysis.
There is no possibility for over production or unemployment.

Implications of the Say’s law of market:

Over production or unemployment is not possible.
The unutilized resources are employed when factors accept rewards according to their productivity under full employment.
No government intervention due to automatic price mechanism in the economy.
Equality between savings and investment due to flexibility in interest.
Money serves as a medium of exchange only because people will not hold idle money.

Criticisms of Say’s law:

According to Keynes supply does not create its demand. It is not applicable where demand does not increase as much as production increases.
Unemployment can be removed by increase in the rate of investment. Automatic adjustment process will not remove unemployment.
Individuals hold money for unforeseen expenses and businessmen keep cash reserve for future activities. So money is not neutral.
According to say there is no over production but according to Keynes over production is possible.
Because of under employment in capitalist economies, Keynes regards full employment as a special case.
The government intervention arises in the case of general over production and mass unemployment.

Question 17.
Narrate the equilibrium between ADF and ASF with diagram.
Answer:
Equilibrium between ADF and ASF could be explained with household and business sector (Two sector economy). It is assumed that consumption function is linear and planned investment is autonomous.
There are two approaches
(i) Aggregate demand – Aggregate supply approach
(ii) Saving – Investment approach
AD and AS approach is only taken to explain the determination of equilibrium level of income and employment.

TN Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income 6

At the point ‘E’ the AD and AS reach equilibrium. The employment level is N₀ at that point. At ON₁, employment, the aggregate is N₁, R₁. But they are able to produce M₁, N₁.The expected level of profit is M₁, R₁.

At this level, entrepreneurs will employ more labourers. At the point E, the employment of labour will reach max and it will stop. At the level of beyond ON₀ the aggregate demand curve is below the aggregate supply curve. But it will indicate loss to the producers. So they will not employ more than ON₀ labour. Equilibrium level of employment need not be the full employment level (N₁) the difference between N₀ – N_f is the level of unemployment. Sa the concept of effective demand is significant in explaining the under employment equilibrium.

Question 18.
Explain the differences between classical theory and keynes theory.
Answer:
For answer refer q.no : 14

Multiple Choice Questions:

Question 1.
Every able bodied person who is willing to work at the prevailing wage rate is employed called as:
(a) Full employment
(b) Under employment
(c) Unemployment
(d) Employment opportunity
Answer:
(a) Full employment

Question 2.
Structural unemployment is a feature in a:
(a) Static society
(b) Socialist society
(c) Dynamic society
(d) Mixed economy
Answer:
(c) Dynamic society

Question 3.
In disguised unemployment, the marginal productivity of labour is:
(a) Zero
(b) One
(c) Two
(d) Positive
Answer:
(a) Zero

Question 4.
The main concention of the Classical Economic Theory is:
(a) Under employment
(b) Economy is always in the state of equilibrium
(c) Demand creates its supply
(d) Imperfect competition
Answer:
(b) Economy is always in the state of equilibrium

Question 5.
J.B. Say is a:
(a) Neo Classical Economist
(b) Classsical Economist
(c) Modern Economist
(d) New Economist
Answer:
(b) Classsical Economist

Question 6.
According to Keynes, which type of unemployment prevails in capitalist economy ?
(a) Full employment
(b) Voluntary unemployment
(c) Involuntary unemployment
(d) Under employment
Answer:
(d) Under employment

Question 7.
The core of the classical theory of employment is:
(a) Law of Diminishing Return
(b) Law of Demand
(c) Law of Markets
(d) Law of Consumption
Answer:
(c) Law of Markets

Question 8.
Keynes attributes unemployment to:
(a) A lack of effective supply
(b) A lock of effective demand
(c) A lack of both
(d) None of the above
Answer:
(b) A lock of effective demand

Question 9.
__________ Flexibility brings equality between saving and investment.
(a) Demand
(b) Supply
(c) Capital
(d) Interest
Answer:
(d) Interest

Question 10.
_____ theory is a turning point in the development of modern economic theory.
(a) Keynes
(b) Say’s
(c) Classical
(d) Employment
Answer:
(a) Keynes

Question 11.
The basic concept used in Keynes Theory of Employment and Income is:
(a) Aggregate demand
(b) Aggregate supply
(c) Effective demand
(d) Marginal Propensity Consume
Answer:
(c) Effective demand

Question 12.
The component of aggregate demand is:
(a) Personal demand
(b) Government Expenditure
(c) Only export
(d) Only import
Answer:
(b) Government Expenditure

Question 13.
Aggregate supply is equal to:
(a) C +1 + G
(b) C + S + G + (X – M)
(c) C + S + T + (X – M)
(d) C + S + T + Rf
Answer:
(d) C + S + T + Rf

Question 14.
Keynes theory pursues to replace laissez faire by:
(a) No government intervention
(b) Maximum intervention
(c) State intervention in certain situation
(d) Private sector intervention
Answer:
(c) State intervention in certain situation

Question 15.
In Keynes theory of employment and income, _________ is the basic cause of economic depression.
(a) Less production
(b) More demand
(c) Inelastic supply
(d) Less aggregate demand in relation to productive capacity
Answer:
(d) Less aggregate demand in relation to productive capacity

Question 16.
Classical theory advocates:
(a) Balanced budget
(b) Unbalanced budget
(c) Surplus budget
(d) Deficit budget
Answer:
(a) Balanced budget

Question 17.
Keynes theory emphasized on equilibrium.
(a) Very short run
(b) Short run
(c) Very long run
(d) Long run
Answer:
(b) Short run

Question 18.
According to classical theory, rate of interest is a reward for:
(a) Investment
(b) Demand
(c) Capital
(d) Saving
Answer:
(d) Saving

Question 19.
In Keynes theory, the demand for and supply of money are determined by:
(a) Rate of interest
(b) Effective demand
(c) Aggregate demand
(d) Aggregate supply
Answer:
(a) Rate of interest

Question 20.
Say’s law stressed the operation of ______ in the economy.
(a) Induced price mechanism
(b) Automatic price mechanism
(c) Induced demand
(d) Induced investment
Answer:
(b) Automatic price mechanism

Samacheer Kalvi 12th Economics Notes Chapter 3 Theories of Employment and Income

→ Seasonal unemployment: Occurs during seasons and happens from demand side also.

→ Frictional unemployment: (Temporary unemployment) – Imbalance between supply of and demand for labour. ,

→ Educated unemployment: The qualification does not match the job (Highly responsible jobs)

→ Technical unemployment: Less labour is required and technological improvement creates this

→ Structural unemployment: Change in the structure of the society is drastic.

→ Laissez Faire policy: Literally translated from French (Let it be) – A policy of complete non – intervention by Government in the economy.

→ Wage: Price spiral (Flexibility) – A macro economic theory to explain the cause – and effect relationship between rising prices or inflation.

→ ED – Effective Demand

→ AD – Aggregate Demand

→ AS – Aggregate Supply

→ ADF – Aggregate Demand Function

→ ASF – Aggregate Supply Function

→ MPC – Marginal Propensity to Consume

→ MEC – Marginal Efficiency of Capital.

→ Effective demand = ED = Y = C + I = output + Employment

→ Aggregate Demand = AD = C + I + G + (X – M)

→ Aggregate supply = C + S + T + Rf

→ Rf = Aggregate Income generated in the economy.

TN Board 12th Economics Important Questions

TN Board 12th Economics Important Questions Chapter 2 National Income

November 5, 2021

TN State Board 12th Economics Important Questions Chapter 2 National Income

Question 1.
Define National Income.
Answer:
“The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend”. – Alfred Marshall.
(or)
“The net output of the commodities and services flowing during the year from the country’s productive system into the hands of the ultimate consumers or into net addition to the country’s stock of capital goods – Simon Kuznets.

Question 2.
Write the formula for calculating GNP.
Answer:
GNP at Market Prices = GDP at market prices + Net Factor Income from Abroad
Gross National Product = Gross Domestic Product + NFIA

Question 3.
What is the difference between NNP and NDP?
Answer:

NNP	NDP
It is the value of the net output of the economy during the year.	It is the value of net output of the economy during the year.
It is the Net National Product.	It is the Net Domestic Product.
NNP = GNP – Depreciation	NDP = GDP – Depreciation

Depreciation is also called as capital consumption allowance.

Question 4.
Trace the relationship between GNP and NNP.
Answer:
GNP is the total measure of the flow of final goods and services at market value resulting from current production in a country during a year, including net income from abroad, where as NNP is the net output of the economy during the year.

NNP is the replacement allowance of the capital assets from the GNP i.e., NNP = GNP – depreciation allowance (Depreciation is also called as capital consumption allowance).

Question 5.
What do you mean by the term ‘Personal Income’?
Answer:
Personal Income is the Total Income received by the Individuals before paying direct Taxes from all sources. It also includes Transfer Payments.

Question 6.
Define GDP deflator.
Answer:
It is an index of price changes of goods and services included in GDP.

GDP deflator = (Nominal GDP) / (Real GDP) × 100

Question 7.
Why is self consumption difficult in measuring national income?
Answer:
Measuring of National Income through product method is done by measuring the final goods and services. But farmers keep a large portion of food and other goods for self consumption. So, the unsold product remains undecided as whether to include or not

Question 8.
Write a short note on per capita income.
Answer:
Per Capita Income is an annual average Income of a person. It is income per head of population. Its the average income of person of a country in a particular year.

Per capita income = (National Income) / (Population)

Question 9.
Differentiate between personal and disposable income
Answer:

Personal income	Disposable income
Total income received by the individual of a country from all sources before payment of direct taxes in a year.	It is also known as disposable personal income. It is the individual income after payment of income tax.
Personal Income = NI – Undistributed Corporate Profit + Transfer Payments.	Disposable Income = Personal Income – Direct Tax and Disposable Income = Consumption + saving

Question 10.
Explain briefly NNP at factor cost.
Answer:
It is the cost of total income of payment made to the factors of production. The amount of indirect taxes are deducted and subsidies are added to the money value of NNP at market price to arrive at the NNP FC.
NNP at factor cost = NNP at Market prices – Indirect taxes + Subsidies.

Question 11.
Give short note on Expenditure Method.
Answer:
In this method the total expenditure by the society in a year is added that is personal consumption expenditure, net domestic investment, government expenditure on consumption. Under expenditure method, National Income is measured at the point of actual expenditure. It measures the final expenditure on Gross domestic product at market price during a period of account.

Question 12.
What is the solution to the problem of double counting jn the estimation of national income?
Answer:
The problem of double counting can be solved by value added method. In this method instead of taking value of final products, value added by each firm at each stage of production is included, that is cost of raw materials is not included. So there is no scope for double counting in this method. Value added method is also known as Industry of origin method. This method is used to avoid double counting in calculating national income.

Question 13.
Write briefly about national income and welfare.
Answer:
National income is an indicator of the country’s Economic progress when the country’s GDP increases, then there is increase in standard of living of the people. But the rise in GDP need not always promote economic welfare because welfare is affected by a wide range of factors like economic and .non-economic factors.

Economic factors:
Eg: national income, consumption etc can be expressed in money.

Non – Economic factors:
Eg: environmental hazards and law and order situation cannot be expressed in money. Therefore PQLI Physical Quality of Life Index is considered better indicator of economic welfare. It includes standard of living, life expectancy at birth and literacy.

Question 14.
List out the uses of national income.
Answer:

It describes the economic or production performance of a country.
The National Income data is used by the economists, planners, government, businessmen and International agencies like IMF, world bank etc., for various analytical purposes. ‘
National Income Data helps to note the changes in standard of living of a country over a period of time and to compare with other countries.
The National Income figures are used to measure the level of development of a country.

Question 15.
Explain the importance of national income.
Answer:
(i) National Income is known as the accounts of the economy. It helps to facilitate the task of measurement as it provides a set of procedures and techniques for measurement of income and output of aggregate level.

(ii) National Income provides:
(a) Model of Macro Economic Model and
(b) Enable us to learn few hall mark numbers which help characterize the economy.

(iii) Gives relative importance of the various sectors of the economy. It also enables us to know how income is produced, distributed, saved and spent.
(iv) It indicates performance of the Economy, Structural changes in the Economy, making comparison among Nations.
(v) The National Income data helps to formulate National Policies like monetary and Fiscal policies. It also helps to. build economic models.
(vi) It helps to formulate planning and evaluate progress, to know the distribution of income for various factors of production.
(vii) It enables us to arrive at Macro-economic variables namely Tax – GDP ratio, Current Account Deficit – GDP ratio etc.
(viii) It enables us to know a country’s per capita income which reflects the economic welfare of the country.
(ix) It is helpful to UNO which formulates welfare plans for different countries especially for underdeveloped countries.
(x) National Income data is manifestation of material results of human activity in an economy.

Question 16.
Discuss the various methods of estimating the national income of a country.
Answer:
All goods and services produced in the country must be counted and converted against money value during a year. Whatever is produced is used for consumption or saved. There are three methods that are used to measure National Income.
(i) Production or Value Added Method
(ii) Income or Factor Earning Method (Hi) Expenditure Method
The three methods originate from three different phases in circular flow of National Income.

TN Board 12th Economics Important Questions Chapter 2 National Income 2

National income may be measured by any method, the equation is
Output = income = expenditure

GDP: By sum of spending, Factor incomes or output in all methods, net flow of goods and services which is being looked at from three different angles. Each method provides different view of the economy and also provides a check in the accuracy of the other methods.

TN Board 12th Economics Important Questions Chapter 2 National Income 3

TN Board 12th Economics Important Questions Chapter 2 National Income 4

Question 17.
What are the difficulties involved in the measurement of national income?
Answer:
In India, because of unorganized and non-monetized subsistence sector where the barter system still prevails for transacting goods and services. So proper valuation of output is very difficult.
Difficulties:
(i) Transfer payments:
The government expenditures are not included in National Income because they are paid without adding anything to the production process.

(ii) Difficulties in assessing depreciation / allowence:
It is also difficult to deduct depreciation allowances like accidental damages because it is very difficult to judge.

(iii) Unpaid services:
There are no. of goods and services which are difficult to be assessed in money terms.
Eg: services of house wife;

(iv) Income from illegal activities:
Income earned from gambling, smuggling etc are also not included.

(v) Production for self-consumption and changing price:
Farmers keep a large portion of food and other goods produced on the farm for self consumption and that is not included in the National Income.

(vi) Capital gains:
Capital gains are excluded from National Income. Eg: Property sold at higher price than the purchase price.

(vii) Statistical problems:
Statistical datas are not perfectly reliable co- operaion of people and efficiency of statistical staff is also needed.
Eg: Production in Animal husbandary.

National Income estimate in India are not accurate because of difficulties faced at different levels.

Question 18.
Discuss the importance of social accounting in economic analysis.
Answer:
Measuring National Income by social accounting method. The translations are recorded and the inter relationships are traced. It is very useful for economists and policy makers.
The economy is divided into several sectors in social accounting method.
(i) Firms:
These are organisations which employ the factors of production.

(ii) Households:
It receive payments for their services to the firms, so the firms make payment to households for their services.

(iii) Government sector:
The economic transactions of public bodies at all levels. The main function of the government is to provide social goods like defence, education etc.

(iv) Rest of the world sector:
It is international economic transactions of the country.

(v) Capital sector is saving and investment activities like transactions of banks, insurance etc. these agencies provide financial assistance to the firms activities.

When the sectoral contribution are assessed to GDP, the economy is divided into primary, secondary and tertiary sectors.

Social accounting method is important for economic analysis because it represents the major economic flows and statistical relationships among .various sectors of economic system and it is useful to forecast the trends of economy more accurately.

Multiple Choice Questions:

Question 1.
Net National product at factor cost is also known as:
(a) National Income
(b) Domestic Income
(c) Per capita Income
(d) Salary
Answer:
(a) National Income

Question 2.
Primary sector is:
(a) Industry
(b) Trade
(c) Agriculture
(d) Construction
Answer:
(c) Agriculture

Question 3.
National income is measured by using _________ methods.
(a) Two
(b) Three
(c) Five
(d) Four
Answer:
(b) Three

Question 4.
Income method is measured by summing up of all forms of:
(a) Revenue
(b) Taxes
(c) Expenditure
(d) Income
Answer:
(d) Income

Question 5.
Which is the largest figure?
(a) Disposable income
(b) Personal Income
(c) NNP
(d) GNP
Answer:
(d) GNP

Question 6.
Expenditure method is used to estimate national income in:
(a) Construction sector
(b) Agricultural Sector
(c) Service sector
(d) Banking sector
Answer:
(a) Construction sector

Question 7.
Tertiary sector is also called as ________ sector.
(a) Service
(b) Income
(c) Industrial
(d) Production
Answer:
(a) Service

Question 8.
National income is a measure of the ________ performance of an economy.
(a) Industrial
(b) Agricultural
(c) Economic
(d) Consumption
Answer:
(c) Economic

Question 9.
Per capita income is obtained by dividing the National income by:
(a) Production
(b) Population of a country
(c) Expenditure
(d) GNP
Answer:
(b) Population of a country.

Question 10.
GNP = ______ + Net factor income from abroad.
(a) NNP
(b) NDP
(c) GDP
(d) Personal income
Answer:
(c) GDP

Question 11.
NNP stands for:
(a) Net National Product
(b) National Net product
(c) National Net Provident
(d) Net National Provident
Answer:
(a) Net National Product

Question 12.
_______ is deducted from gross value to get the net value.
(a) Income
(b) Depreciation
(c) Expenditure
(d) Value of final goods
Answer:
(b) Depreciation

Question 13.
The financial year in India is:
(a) April 1 to March 31
(b) March 1 to April 30
(c) March 1 to March 16
(d) January 1 to, December 31
Answer:
(c) March 1 to March 16

Question 14.
When net factor income from abroad is deducted from NNP, the net value is:
(a) Gross National Product
(b) Disposable Income
(c) Net Domestic Product
(d) Personal Income
Answer:
(b) Disposable Income

Question 15.
The value of NNP at production point is called:
(a) NNP at factor cost
(b) NNP at market cost
(c) GNP at factor cost
(d) Per capita income
Answer:
(c) GNP at factor cost

Question 16.
The average income of the country is:
(a) Personal Income
(b) Per capita income
(c) Inflation Rate
(d) Disposal Income
Answer:
(b) Per capita income

Question 17.
The value of national income adjusted for inflation is called:
(a) Inflation Rate
(b) Disposal Income
(c) GNP
(d) Real national income
Answer:
(d) Real national income

Question 18.
Which is a flow concept?
(a) Number of shirts
(b) Total wealth
(c) Monthly income
(d) Money supply
Answer:
(c) Monthly income

Question 19.
PQLI stands for:
(a) Economic growth
(b) Economic welfare
(c) Economic progress
(d) Economic development
Answer:
(b) Economic welfare

Question 20.
The largest proportion of national income comes from:
(a) Private sector
(b) Local sector
(c) Public sector
(d) None of the above
Answer:
(a) Private sector

Samacheer Kalvi 12th Economics Notes Chapter 2 National Income

→ Depreciation: Fall in value of fixed assets due to normal wear and tear and foreseen obsolescene.

→ Intermediate products: Goods and services purchased by one unit from another, used or resold during the same year.

→ COE: Total remuneration in cash and in the form of social security contributions by employers to their employees.

→ Royalty: Amount payable to the landlord for granting the leasing rights of subsoil assets.

→ PFCE: The sum of final consumption expenditure by households and private non-profit institutions serving households.

→ GFCE: Expenditure incurred by general government on producing free services to the people.

→ GDCF: Addition to the stock of capital undertaken by the production units located within economic or domestic territory of the country.

→ Personal Disposable Income: Sum of factor and non-factor incomes occurring to the households after payment of direct taxes.

→ Private Income: Sum of factor and non-factor incomes before payment of direct-taxes occurring to houselholds.

→ Economic Welfare: Welfare affected by economic factors like Income and Consumption is called Economic Welfare.

→ GDP: Gross Domestic Product – Aggregate value of goods and services produced within the domestic territory of a country.

→ Gross Fiscal Deficit: The excess of total government expenditure over revenue receipts and capital receipts that do not create debt.

→ National Disposable Income: Net National Product at Market Price + other Current Transfers from the rest of the world.

→ Net Domestic Product (NDP): Aggregate value of goods and services produced within the domestic territory of a country which does not include the depreciation of capital stock.

→ NNP: (At factor cost) or National Income (NI)
NNP at market price – Indirect taxes + subsidies.

→ IC – Intermediate Consumption
→ D – Depreciation (or Consumption of Fixed Capital)
→ NFIA – Net Factor Income from Abroad.
→ NIT – Net Indirect Taxes (T-S)
→ COE – Compensation of Employees
→ R, I & P – Rent and Royalty, Interest and Profits.
→ MI – Mixed Income
→ PFCE – Private Final Consumption Expenditure
→ GFCE – Government Final Consumption Expenditure
→ GDCF – Gross Domestic Capital Formation
→ (X – M) – Net Exports
→ ∆S – (Delta) change in stock.

Chart showing Reconciliation of three methods of measuring:

TN Board 12th Economics Important Questions Chapter 2 National Income 1

→ Depreciation: (Gross = Net + Depreciation)
(Difference between Gross and Net)
(a) Net Product = Gross value added – Depreciation
(b) Net Value added = Gross value added – Depreciation.
(c) Net Investment = Gross Investment – Depreciation.

→ Net Indirect Taxes (Market Price = Factor Cost + NIT)
(Difference between Market Price and Factor Cost)
(a) Market Price = Factor Cost + Indirect Taxes – Subsidies.
(b) Market Price = Factor Price + Net Indirect Taxes
(c) Factor Cost = Market Price – Indirect Taxes
(d) GDP at Factor Cost = GDP at MP – Net Indirect-Taxes.
(e) Net Value added at Factor Cost = Net Value added at Market Price – Net Indirect Tax.
(f) GDP at MP = GNP at Factor Cost + Net Indirect Taxes.
(g) National Income = Domestic Income + Net Factor Income from Abroad
(h) Domestic Income = National Income – NFLA
GNP = GDP + NFIA
NDP_MP = GDP_MP – Depreciation
GNP_MP = GDP_MP – NFIA
NNP_MP = GNP_MP – Depreciation
TN Board 12th Economics Important Questions

TN Board 12th Economics Important Questions Chapter 1 Introduction to Macro Economics

November 5, 2021

TN State Board 12th Economics Important Questions Chapter 1 Introduction to Macro Economics

Question 1.
Define Macro Economics.
Answer:
It is the study of aggregates covering the entire economy such as total employment, national income, national output, total consumption, total investment, total savings, ag gregate demand and supply general price level, wage level, and cost structure.
[OR]
Macro economics is the study of the economy as a whole. It deals with aggregates such as national income, employment and output.

Question 2.
Define the term ‘Inflation’.
Answer:
Inflation refers to steady increase in general price level.

Question 3.
What is meant by an ‘Economy’?
Answer:
Definition by AJ.Brown- “A system by which people earn their living”

“An economy is a cooperation of producers and workers to make goods and services that satisfy the wants of the consumers”. – J.R.Hicks

Question 4.
Classify the economies based on status of development.
Answer:
Economies can be classified into different types based on the status of development as developed, under developed, undeveloped and developing economies. .

Question 5.
What do you mean by Capitalism?
Answer:
Capitalism- It means there is total freedom and private ownership of means of production.

Question 6.
Define ‘Economic Model’.
Answer:
A model is an explanation of how the economy, or part of the economy, works.

Question 7.
‘Circular Flow of Income’ – Define.
Answer:
It is a model of an economy showing connections between different sectors of an economy.

Question 8.
State the importance of Macro Economics.
Answer:

The basic problems is an economy can be solved using suitable strategies if we understand the functioning of an economy at the aggregate level i.e., Macro economics.
It is important to know macro economics so that to take precautionary . measures for future problems and for the needs and challenges of an economy.
It provides opportunities to understand the reality and to use scientific investigations.
It helps to compare and analyses the economic indicators.
It helps us to predict about future economic crises and to form suitable policies.

Question 9.
Describe the different types of economic systems.
Answer:
It is the methodology of doing economic activities to meet the needs of the society. The three economic systems are:
(i) Capitalist economy:
Total freedom and private ownership of means of production.

(ii) Socialist economy:
There is public ownership means of production.

(iii) Mixed economy:
Co-existence of capitalism and socialism.

Question 10.
Outline the major merits of capitalism.
Answer:

Automatic working: The economic works automatically without any interventions of government.
Efficient use of resources: Resources are used to its maximum.
Incentives for hard work: The entrepreneurs earn maximum profit for their efficiency.
Economic progress: Productivity level is maximum.
Consumer’s sovereignty: Production aims to give maximum satisfaction to the consumers.
Higher rate of capital formation: Because of increase in savings and investment.
Development of new technologies: The producers invest on new technologies to produce quality products and to maximise profit.

Question 11.
Indicate the demerits of socialism.
Answer:
Demerits of socialism:
(i) Red tapism and bureaucracy:
The decisions are taken by the government, there are chances of corruptions and delay.

(ii) Absence of incentive:
In socialism, efficiency is not encouraged so there is reduction in production also.

(iii) Limited freedom of choice:
Consumers choices are limited on goods and services.

(iv) Concentration of Power:
Major decisions are taken only by the Government so, in many cases, the power can be misused.

Question 12.
Enumerate the features of mixed economy.
Answer:
Ownership of property and means of production:
Because of the co¬existence of public and private sectors, production, properties are owned by both and they have the right to use and transfer resources.

Co-existence of public and private sectors:
Private industries are for profit and public sector work for social welfare.

Economic planning:
Economic and national planning is done in common by central planning authority of the Government and it is abided by all sectors.

Solution to economic problems:
The basic economic problems are solved through price mechanism and Government intervention.

Freedom and control:
The overall control on the economic activities are with the government.

Question 13.
Distinguish between Capitalism and Globalism.
Answer:

Capitalism	Globalism
In capitalism the role of the government is minimum and the market determines the economic activities.	In globalism, the new market ideology of globalization connects nations together through international trade and aiming at global development.
Capitalist economy is also known as market economy.	Globalism is also termed as extended capitalism.

Question 14.
Briefly explain the two sector circular flow model.
Answer:
The circular flow of income is a model of an economy showing connections between different sectors of an economy. There are two sectors i.e., household and firms.
(i) The household sector receives income from firm sector by providing the factors of productions owned by it.
(ii) The firm gets its income by selling goods and services to the household sector. It sells the entire output of households. In the two sector economy, production and sales are equal.
Diagram of two sector economy

TN State Board 12th Economics Important Questions Chapter 1 Introduction to Macro Economics 4

(i) Outer circle – Real flow [factors and goods]
(ii) Inner circle – Monetary flow[factor and commodity prices]
Y = C + 1 → basic identity
Y = income, C = Consumption, I = Investment
(a) Factor services flow from household to firm and
(b) Goods and services flow from firm to household

Question 15.
Discuss the scope of Macro Economics.
Answer:
Macro economic study has a wide scope and it covers major areas of economics such as:

(i) National income:
The growth process of an economy depends on the composition and measurement of its national income.

(ii) Inflation:
The general price level is estimated by constructing various price index numbers such as whole sale price index, consumer price index. This is given by macro economics.

(iii) Business cycle:
The cyclical movements such as boom, recession, depression and recovery in the economy are studied as business fluctuations under macro economics.

(iv) Poverty and unemployment:
It is the most important economic paradoxes of rich nations. Macro economic studies gives a clear understanding about the magnitude of poverty and unemployment and the corrective measures.

(v) Economic growth:
Macro economic analysis study helps to understand the growth and development of an economy.

(vi) Economic policies:
The basic problems of an economy are solved by economic policies. Economic policies are framed through macro economic studies. These are the scope of macro economic studies.

Question 16.
Illustrate the functioning of an economy based on its activities.
Answer:
Economy is a system where the Economic activities are carried out. The economic functions and activities varies according to the character of each economy. [Refer to flowchart given in III (B) -1]
Explanation:
The fundamental economic activities of an economy are

Production and
Consumption.

The aim of the activities are to achieve growth. The production and consumption activities are known as fundamental economic activities. They are supported by exchange activity Economic and Non – Economic activities.

The economic activities are:
Transportation, banking, advertising, planning and Government Policies.

The Non-Economic activities are:
Environment, Education, Entertainment, Government regulations etc.

The Supporting activities or External activities are:
Import, Export, international relations, Emigration, Immigration, Foreign investment, Foreign exchange earnings etc., These activities also influence the entire functioning of the economy.

Question 17.
Compare the features of capitalism and socialism.
Answer:

TN State Board 12th Economics Important Questions Chapter 1 Introduction to Macro Economics 1

Question 18.
Compare the feature among Capitalism, Socialism and Mixedism.
Answer:

TN State Board 12th Economics Important Questions Chapter 1 Introduction to Macro Economics 2

TN State Board 12th Economics Important Questions Chapter 1 Introduction to Macro Economics 3

Multiple Choice Questions:

Question 1.
The branches of the subject Economics is:
(a) Wealth and welfare
(b) Production and consumption
(c) Demand and supply
(d) Micro and macro
Answer:
(d) Micro and macro

Question 2.
Who coined the word ‘Macro’?
(a) Adam Smith
(b) J M Keynes
(c) Ragnar Frisch
(d) Karl Marx
Answer:
(c) Ragnar Frisch

Question 3.
Who is regarded as Father of Modern Macro Economics?
(a) Adam Smith
(b) J M Keynes
(c) Ragnar Frisch
(d) Karl Marx
Answer:
(b) J M Keynes

Question 4.
Identify the other name for Macro Economics:
(a) Price Theory
(b) Income Theory
(c) Market Theory
(d) Micro Theory
Answer:
(b) Income Theory

Question 5.
Macro economics is a study of:
(a) individuals
(b) firms
(c) a nation
(d) aggregates
Answer:
(d) aggregates

Question 6.
Indicate the contribution of J M Keynes to economics.
(a) Wealth of Nations
(b) General Theory
(c) Capital
(d) Public Finance
Answer:
(b) General Theory

Question 7.
A steady increase in general price level is termed as:
(a) Wholesale price index
(b) Business Cycle
(c) Inflation
(d) National Income
Answer:
(c) Inflation

Question 8.
Identify the necessity of Economic policies.
(a) to solve the basic problems
(b) to overcome the obstacles
(c) to achieve growth
(d) all the above
Answer:
(d) all the above

Question 9.
Indicate the fundamental economic activities of an economy.
(a) Production and Distribution
(b) Production and Exchange
(c) Production and Consumption
(d) Production and Marketing
Answer:
(c) Production and Consumption

Question 10.
An economy consists of:
(a) Consumption sector
(b) Production Sector
(c) Government sector
(d) All of the above
Answer:
(d) All of the above

Question 11.
Identify the economic system where only private ownership of production exists.
(a) Capitalistic Economy
(b) Socialistic Economy
(c) Globalistic Economy
(d) Mixed Economy
Answer:
(a) Capitalistic Economy

Question 12.
Economic system representing equality in distribution is:
(a) Capitalism
(b) Globalism
(c) Mixedism
(d) Socialism
Answer:
(d) Socialism

Question 13.
Who is referred as ‘Father of Capitalism’?
(a) Adam Smith
(b) Karl Marx
(c) Thackeray
(d) J M Keynes
Answer:
(a) Adam Smith

Question 14.
The country following Capitalism is:
(a) Russia
(b) America
(c) India
(d) China
Answer:
(b) America

Question 15.
Identify The Father of Socialism.
(a) J M Keynes
(b) Karl Marx
(c) Adam Smith
(d) Samuelson
Answer:
(b) Karl Marx

Question 16.
An economic system where the economic activities of a nation are done both by the private and public together is termed as:
(a) Capitalistic Economy
(b) Socialistic Economy
(c) Globalistic Economy
(d) Mixed Economy
Answer:
(d) Mixed Economy

Question 17.
Quantity of a commodity accumulated at a point of time is termed as:
(a) production
(b) stock
(c) variable
(d) flow
Answer:
(b) stock

Question 18.
Identify the flow variable:
(a) money supply
(b) assets
(c) income
(d) foreign exchange reserves
Answer:
(c) income

Question 19.
Identify the sectors of a Two Sector Model:
(a) Households and Firms
(b) Private and Public
(c) Internal and External
(d) Firms and Government
Answer:
(a) Households and Firms

Question 20.
The Circular Flow Model that represents an open Economy:
(a) Two Sector Model
(b) Three Sector Model
(c) Four Sector Model
(d) All the above
Answer:
(c) Four Sector Model

Samacheer Kalvi 12th Economics Notes Chapter 1 Introduction to Macro Economics

→ National Income: Total Income of residents of a Country.

→ Inflation: A sustained rise in general Price level

→ Business Level: The recurring and fluctuating level of Economic Activity.

→ Balance of Payment: A statement of Countries Economic Transaction with the rest of the world.

→ Foreign Exchange Reserves: Assets held by Central bank (RBI) and monetary authorities usually in different reserve currencies.

→ Laissez Faire: A policy of complete Non-Intervention by Government in the Economy leaving all decisions to the market.

→ Exchange Rate: The price (rate) at which one currency is exchanged for another.

→ Economic Growth: Economic growth is a process of sustained increase in Country’s real income over a long period of time.

→ Balance of Trade: It is the difference between the money value of Exports and Imports of material goods.

→ External Sector: It refers to the Economic transaction of the domestic country with the rest of the world.

TN Board 12th Economics Important Questions

TN Board 12th Economics Important Questions and Answers

November 5, 2021

TN 12th Economics Important Questions State Board English Medium 2021-2022.

TN State Board 12th Economics Important Questions and Answers

TN Board 12th Commerce Important Questions Chapter 28 Company Secretary

November 2, 2021

TN State Board 12th Commerce Important Questions Chapter 28 Company Secretary

Question 1.
Who is a Secretary?
Answer:
The person who is responsible for the general performance of an organization is called company secretary. The person who steers the company holding the administrative financial and overall performance of the company is called company secretary.

Question 2.
Define Meeting.
Answer:
A meeting is a gathering of two or more people that has been convened for the purpose of achieving a common goal through verbal interaction such as sharing information or reaching agreement.

Question 3.
What is Resolution.
Answer:
As per the companies act 2013, for taking any decision or executing any transaction, the consent of the share holders, the board of directors and other specified required. The decisions taken at a meeting are called resolution.

Question 4.
Write short note on ‘Proxy’.
Answer:
Proxy means a person being the representative of a share holder at the meeting of the company who may be described as his agent to carry out which the share holder has himself decide upon. Proxy can be present at the meeting and he cannot vote.

Question 5.
What is Vote?
Answer:
The word vote originated in Latin word “Votum” indicating one’s wishes or desire by casting his vote one formally declaring his opinion or wish in favour of or against a proposal or a candidate to be elected for an office. The proposals passed across the table of any company depend mainly on the votes cast by the board directors.

Question 6.
What is Special Resolution?
Answer:
A special resolution is the one which is passed by a not less than 75% of majority. The number of votes, cast infavour of the resolution should be three times the number of vote cast against it. The intention of proposing a resolution as a special resolution must be specially mentioned in the notice of the general meeting.

Question 7.
What do you mean by Statutory Meeting?
Answer:
According to companies act, every public company should hold a meeting of the share holders within 6 months but not earlier than one month from the date of commencement of business of the company. This is the first general meeting of the public company is called the statutory meeting.

Question 8.
What do you understand by ‘Poll’?
Answer:
Poll means tendering or offering vote by ballot to a specially appointed officer called the polling officer under the companies act, poll means exercising.

Question 9.
Give any three cases in which an ordinary resolution need to be passed.
Answer:
An ordinary resolution is one which can be passed by a simple majority. If the members of votes cast by members, entitled to vote infavour of the resolution is more than the vote cast against the resolution.

To change or rectify the name of the company.
To alter the share capital of the company.
To redeem the debentures.
To approve annual accounts and balance sheet.

Question 10.
What resolution is requires special notice?
Answer:
There are certain matters specified in the companies act 2013 which may be discussed at a general meeting only if a special notice is given at least 14 days before the meeting. The following matters require special notice before they are discussed in the meeting.

To appoint an auditor, a person other than a retiring auditor.
To provide expressly that a retiring auditor shall not be reappointed.
To remove a director before the expiry of his period of office.
To appoint a director in the place of a director so removed.

Question 11.
Elaborate the functions of the Company Secretary.
Answer:
(i) Statutory functions:

(a) According to companies Act 2013:
(i) To sign document and proceedings requiring authentication by the company.
(ii) To give notice to register for increase in the share capital.
(iii) To deliver share certificate of allotment within two months after transfer.
(iv) To sign and send annual return.

(b) Under the income tax act:
Secretary has to submit and verify various forms for timely filling income tax returns to the authorities in accordance with the law. He has to see that the certificate of tax deducted at source (TDS) is issued to every employees and share holders.

(c) Under Indian stamp act:
The company secretary has to ensure that whatever proper stamps are affixed on the company’s documents like letter of allotment and share certificate or not.

(d) Under the sales tax act:
He must ensure timely submission of tax returns to the sales tax authorities and payment of tax.

(e) Under other act:
He must see that the provisions of any other act applicable to the company. Eg: Foreign Exchange Regulation Act.

(ii) Non-statutory functions:
Secretary has to discharge non statutory functions in relation to directors, share holders and office and staff. These functions are briefly mentioned.

(a) Functions as agent of directors:
A company secretary acts under the full control of the board of directors and carry out the instruction of the directors. It is the secretary’s duty to implement the decisions taken by the board of directors.

(b) Functions towards share holders:
The company secretary must serve in the best interest of the shareholders under the companies act 2013. Secretary should act link between the board of directors and the share holders and ensure that the share holders rights are violated.

(c) Functions towards office and staff:
The secretary is the king pin of the whole corporate machinery. He is responsible for smooth functioning of the office work. He exercises an overall supervision control and coordinate of all clerical activities in the office.

Question 12.
Discuss the liabilities of Company Secretary.
Answer:
As the principal officer of the company, the secretary must observe all the legal formalities in respect of the provision of the companies act and other laws (Income tax, Stamp act, Sales tax acts etc.).
According to companies act 2013

To sign document and proceedings requiring authentication by the company.
To maintaining share register and register of directors and of contracts.
To give notice to register for increase in the share capital.
To deliver share certificate of allotment within two months after transfer.
To sign and send annual return.
To sent notice of general meeting to every member of the company.
To make statutory book.
To prepare minute of every general meeting and board meeting within 30 days.
To file a resolution with the registrar.
To assist in preparing the statement of affairs in a winding up.

Question 13.
Briefly state different types of company meetings.
Answer:
Under the companies act 2013, company meetings can be classified as under

(i) Meetings of share holders:
(a) Statutory meeting
(b) Annual General Meetings (AGM)
(c) Extra ordinary General Meetings (EGM)

(ii) Meetings of the directors:
(a) Board meetings
(b) Committees meetings

(iii) Special meetings:
(a) Class meetings
(b) Creditors and of debenture / bond holders meetings

(iv) Share holders meeting:
The meeting held with the shareholders of the company is called shareholder meeting.
(a) Statutory Meetings:
This is the first general meeting of the public company is called the Statutory meeting. This meeting is conducted only once in the life time of the company. The company gives the circular to share holders before 21 days of the meeting.

(b) Annual General Meeting (AGM):
Company is bound to invite the first general meeting within 18 months from the date of registration. Every annual general meeting shall be held during business hours, on a day which is not a public holiday.

(c) Extra-ordinary general meetings:
All other general meetings other than statutory and annual general meetings are called extra¬ordinary general meetings. If any meeting conducted in between two annual general meeting to deal with some urgent or special or extra-ordinary nature of business is called as extra-ordinary general meetings.

(v) Meeting of the board of directors:
Regarding administration of the company lies in the hands of the board of directors, they should meet frequently for the proper conduct of business and to decide policy matters of the company.
(a) Board meetings:
Meetings of directors are called as board meetings. First meeting of directors should be convened within 30 days from the date of incorporation of the company.

(b) Committee meetings:
This committee should meet at least four times in a year. In case of other companies, the board of directors shall nominate a director to play the role of audit committee which is functioning as a vigil mechanism.

(vi) Special meetings:
(a) Class meeting:
Meetings, which are held by a particular class of share or debenture holders. Eg: preference share holders or debenture holders is known as class meeting. These meetings are held according to the rules and regulations laid by the trust deed.

(b) Meeting of the creditors:
Strictly speaking, these are not meetings of a company. A situation in which a company may wish to arrive at a consensues with the creditors to avoid any crisis or to evolve compromise or introduce any new proposals.

Question 14.
Describe the different types of resolutions which company may pass with suitable matters required for each type of resolution.
Answer:
There are broadly three types of resolutions namely ordinary resolution, special resolution and resolution special notice.
(i) Ordinary resolution:
An ordinary resolution is one which can be passed by simple majority. Ordinary resolution is required for the following matters.
(a) To change or rectify the name of the company.
(b) To redeem the debentures.
(c) To declare the dividends.
(d) To appoint the directors.
(e) To alter the share capital of the company.

(ii) Special resolutions:
A special resolution is the one which is passed by a not less than 75% of the majority. Special resolutions is required for the following methods.
(a) To change the registered office of the company from one state to another.
(b) To change the objective of the company.
(c) To commence any new business.
(d) To alter the articles of association.
(e) To change the name of the company.

(iii) Resolution requiring special notice:
There are certain matters specified in the companies act 2013, which may be discussed at a general meeting only if a special notice is given at least 14 days before the meeting. The following matters require special notice before they are discussed in the meeting.
(a) To appoint an auditor, a person other than a retiring auditor.
(b) To provide expressly that a retiring auditor shall not be reappointed.
(c) To remove a director before the expiry of his period of office.
(d) To appoint a director in the place of a director so removed.

Question 15.
Explain different types of open and secret types of voting.
Answer:
(i) Open procedure:
This type of voting has no secrecy as the all the members assembled can see voting. There are two popular methods of open voting namely voice voting and voting by show of hands.
(a) By voice: Voice voting in which the chairman allows the members to raise their voice in favour or against an issue “yes” for approval and “no” for rejection.

(b) By show of hands: Under this method, the chairman requests the members to raise their hands of those who are in favour of the proposal or candidate and then requests those are against.

(ii) Secret procedure:
Secret procedure is adopted to decide certain vital issues. It is a popular voting method that could maintain the secrecy of the voter.
(a) By ballot:
Under this system, ballot paper bearing serial number is given to the members to record their opinion by marking with the symbol or share holders have to cast their vote in a secret chamber and put the ballot paper into the ballot box. The chairman opens the ballot box in the presence of tellers or scrutinizers and counts the votes. The votes are counted and the results are announced.

(b) Postal ballot:
Under this method, serially numbered ballot papers are sent by post in sealed covers to the members, who living at a distance place, are unable to attend the meeting physically. The members or voters fill in the ballot papers and return them in sealed covers which are opened when the ballot box is opened for counting the votes.

Choose the correct answer:

Question 1.
Mention the status of a Company Secretary in a company:
(a) A member
(b) A director
(c) An independent
(d) An employee contractor
Answer:
(d) An employee contractor

Question 2.
Who can become a secretary for a company?
(a) Individual person
(b) Partnership firm
(c) Co-operative societies
(d) Trade unions
Answer:
(a) Individual person

Question 3.
Which meeting will be held only once in the life time of the company?
(a) Statutory
(b) Annual General
(c) Extra – ordinary
(d) Class General
Answer:
(a) Statutory

Question 4.
Board Meetings to be conducted minimum ________ times in a year.
(a) 2
(b) 3
(c) 4
(d) 5
Answer:
(c) 4

Question 5.
Who is not entitled to speak at the annual general meeting of the company?
(a) Auditor
(b) Shareholder
(c) Proxy
(d) Directors
Answer:
(c) Proxy

Question 6.
Mention the company which need not convene the Statutory Meeting:
(a) Widely held public
(b) Private Limited
(c) Public Limited
(d) Guarantee having a share capital
Answer:
(b) Private Limited

Question 7.
From the date of its incorporation the First Annual General Meeting is to be conducted within months.
(a) Twelve
(b) Fifteen
(c) Eighteen
(d) Twenty one
Answer:
(b) Fifteen

Question 8.
What percentage of shareholders is needed to pass special resolution?
(a) It must be unanimous
(b) Not less than 90%
(c) Not less than 75%
(d) More than 50%
Answer:
(c) Not less than 75%

Question 9.
A special resolution must be filed with the Registrar within:
(a) 7 days
(b) 14 days
(c) 30 days
(d) 60 days
Answer:
(c) 30 days

Question 10.
A special resolution is required to:
(a) redeem the debentures
(b) declare dividend
(c) appoint directors
(d) appoint auditor
Answer:
(d) appoint auditor

TN Board 12th Commerce Important Questions

TN Board 12th Commerce Important Questions Chapter 27 Company Management

November 2, 2021

TN State Board 12th Commerce Important Questions Chapter 27 Company Management

Question 1.
Define Director.
Answer:
The companies act 2013 section 2(34) defines a director appointed to the board of company is “ A person who is appointed or elected member of the board of directors of a company and has the responsibility of determining and implementing policies along with others in the board. It is not necessary, to hold any shares in the company or be an employee. Directors act on the basis of resolutions made in the board of directors meeting according to their powers stated in the articles of association of the company”.

Question 2.
Name the companies required to appoint KMP.
Answer:

TN State Board 12th Commerce Important Questions Chapter 27 Company Management 1

Requirement to appoint “KMP”:
(i) Every listed
(ii) Every public company(Having paid up share capital of ₹ 10 crore or more).

Question 3.
Who is whole time Director?
Answer:
A director is one who devotes whole of his time of working hours to the company and has a significant personal interest in the company as the source of his income.

Question 4.
Who is called as Managing Director?
Answer:
A director is one who is employed by the company and has substantial powers of management over the affairs of the company subject to superintendence direction and control of the board.

Question 5.
Who can be Executive Director?
Answer:
An executive director is a chief executive officer (CEO) or managing director of an organization, company or corporation who is responsible for making decisions to complete the mission and for the success of the organization. In the globalized business world the title of president or of chief executive officer is used instead of managing director.

Question 6.
Differentiate Executive and Non-Executive Directors.
Answer:

Executive Director	Non – Executive director
An executive director can be either a whole time director of the company or a managing director.	Non – executive director is a director who is neither a whole time director nor a managing director.
He is responsible for making decisions to complete mission and for the success of the organization.	Non – executive director’s responsibilities include the monitoring of the executive directors and acting in the interest of the company shareholders.

Question 7.
When are alternative directors appointed?
Answer:
Alternate director is appointed by the board of directors, as a substitute to a director who may be absent from India for a period which is not less than three months. The appointment must be authorized either by the articles of association of the company or by passing a resolution in the general meeting.

Question 8.
Who is a shadow director?
Answer:
A person who is not the member of board but has some power to run it can be appointed as the director but according to his/her wish. A shadow director is a person in accordance with whose directions or instructions the directors of a company are accustomed to act.

Question 9.
What is causal Vacancy?
Answer:
Vacancy arising due to death of director, his resignation or insolvency and not by efflux of time or retirement by rotation. Failure an elected director to accept the office may also constitute a casual vacancy.

Question 10.
State the minimum number of Directors for a Private company.
Answer:

In case of one person company – the requirement of directors is one.
Other private companies – the minimum requirement of directors is two. B.

Question 11.
Who are the KMP?
Answer:
The definition of the term key managerial personnel is contained in section 2(51) of the companies act 2013. This section states

The chief executive officer
The managing director or the manager
The company secretary
The whole-time director
The chief financial officer and
Such other officer as may be prescribed.

Question 12.
Explain composition of the board of directors.
Answer:
General optimum combination:
Board of directors shall have an optimum combination of executive and non-executive directors with at least one woman director and not less than fifty percent of the board of directors shall comprise of non-executive directors.

When the non-executive director is the chair person:
In this case, at least one third of the board of directors shall comprise of independent directors and where the company does not have a regular non-executive chairperson, at least half of the board of directors shall comprise independent directors.

When the non-executive chairperson is a promoter or is related to any promoter or person occupying management positions at the level of board of director or at one level below the board of directors. In this case, at least one half of the board of directors of the company shall consist of independent directors.

Question 13.
Brief different types of Directors.
Answer:
Residential director:
According to section 149(3) of companies act 2013, every company should appoint a director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

Independent director:
According to section 149(6) an independent director is an alternate director other than a managing director who is known as whole time director or nominee director.

Small shareholders directors:
small share holders can appoint a single director in a listed company. But this action needs a proper procedure like handling oyer a notice to at least 1000 share holders or 1/10 of the total share holders.

Nominee director:
A director nominated by any financial institution in pursuance of the provisions of any law for the time being in force or of any agreement or appointed by any government or any other person to represent its interests.

Women director:
As per section 149(1) (a) there are certain categories according to which there should be at least one woman as a director on the board.

Additional directors:
Any individual can be appointed as additional directors by a company.

Alternative directors:
Alternative director is appointed by the board of directors, as a substitute to a director who may be absent from India for a period which is not less than three months.

Shadow director:
A person who is not the member of board but has some power to run it can be appointed as the director but according to his/her wish.

Question 14.
State the qualification of Directors.
Answer:
In general a director shall possess appropriate skills, experience and knowledge is one or more fields of finance, law, management, sales marketing administration, research corporate governance, technical operations related to company business. According to the different provisions relating to the directors the following qualifications may be mentioned.

A director must be a person of sound mind
A director must hold share qualifications of the article of association . provides such
A director must be an individual
A director should be a solvent person
A director should not be convicted by the court for any offence etc.

Question 15.
List the disqualification of a directors.
Answer:
Section 164 of companies Act 2013, has mentioned the disqualification as mentioned below
A person shall not be capable of being appointed director of a company if the director is

Of unsound mind.
An undercharged insolvent.
Has been convicted by a court for any offence involving moral turpitude and sentenced in respect there of to imprisonment for not less than six months.
Has not paid any cell in respect of shares of the company held by him, whether alone or jointly with others.
An order disqualifying him for appointment as director has been passed by a court in pursuance of section 203.
He has been convicted of the offence dealing with related party transactions under section 188.
He has not got the director identification number.

Question 16.
Explain how director of a company can be removed from the office.
Answer:
A director of company can be removed from his office before the expiry of his term by.
(a) Removal by share holders:
A company (whether public or private) may by giving a. special notice and passing an ordinary resolution, remove a director before the expiry of his period of office without the proof of mismanagement, breach of trust, misfeasance or other misconduct on the part of the director. If the shareholders feel that the policies pursued by the director are not appropriate, then director can be removed.

(b) Removal by the Central Government:
The central government has been empowered to remove managerial personnel from office on the recommendation of the company law board under the following circumstances.
(i) Where a person concerned in the conduct and management of the affairs of a company has been guilty of fraud, misfeasance, persistent negligence in carrying out his obligations.
(ii) Business company managed by a person inaccordance with sound business principles or prudent commercial practices.
(iii) A person in a manner which is likely to cause injury or damage to the interest of trade industry or business.
(iv) A person with the intent to defraud its creditors, members or any other person.

(c) Removal by the company law board:
If an application has been made to the company law board against the oppression and mismanagement of the company affairs by a director, then the company law board may order for the termination of the directors tenure.

Question 17.
What is the maximum limit for the Managerial remuneration?
Answer:
Managerial remuneration is payable to a person appointed as 196 of the Act. The term remuneration means any money or its equivalent given or passed to any person for services rendered by him and include perquisites.

Maximum remuneration payable by a company to its managerial personnel:
Remuneration payable by a company in case where is’no profit or inadequacy of profit without central government and to pay remuneration in excess of the above limit is detailed below.

TN State Board 12th Commerce Important Questions Chapter 27 Company Management 2

Question 18.
What are the duties of a directors?
Answer:
Collective duties of directors:
Directors as a part of board perform certain duties collectively. The following are some of those duties exercised collectively.

Approval of annual accounts and authentication of annual accounts
Appointment of first auditors
Issue of notice and holding of board meetings and shareholders meetings or by circulations.

General duties of Directors:

Structuring or new policy to reach the objectives of a company
Issuing instructions to employees for implementation of policy to review company’s progress
Appointing their subordinates like managing director, manager, secretary and other employees.

Specific duties of directors:

Duty to disclose his name, address and occupation
Duty to hold minimum qualification shares within two months after his appointment.
Duty to issue prospectus and fix the minimum subscription
Duty to take care that prospectus should not contain any false or misleading statement
Duty to forfeit and transfer shares
Duty to call on a extraordinary general meeting if necessary
Duty to call statutory and annual general meeting of the company.

Question 19.
State the powers of the directors.
Answer:
The power of the Directors are grouped into four different heads.
Statutory powers of Directors:

Power to make calls on shareholders in respect of money unpaid on their shares
Power to issue debentures
Power to borrow moneys otherwise than on debentures.
Power to make loan
Power to approve financial statement and board reports

Managerial powers of Directors:

Power to contract with the third party.
Power to allot forfeit or transfer shares of company
Power to decode the terms and conditions to issue debentures
Power to appoint manager, managing director, secretary of the company
Power of control supervision of work of subordinates

Power only with a resolution:

To sell or lease any asset of the company
To allow time to the Director for repayment of the loan
To appoint a sole agent for more than 5 years.
To issue bonus shares and for reorganization of share capital

Other powers:

Power to fill casual vacancy
Power to remove key managerial personnel
Power to declare solvency position of the company (iv) Power to make political contribution.

Question 20.
State the Criminal liabilities of Directors.
Answer:
Directors will be liable with a fine and imprisonment or both for fraud of non-compliance of any statutory provisions in the following situations where:

There is mis-statement in prospectus
There is failure to file return on allotment with the registrar.
There is failure to give notice to the registrar for conversion of share into stock.
There is failure to issue share certificate and debenture certificate
There is default in holding annual general meeting
There is failure to provide financial statement
There is failure to maintain, registrar of the members and registrar of debenture holders.

Choose the correct answer:

Question 1.
A person Shall hold office as a director in ________ companies as per the Companies Act, 2013.
(a) 5 companies
(b) 10 companies
(c) 20 companies
(d) 15 companies
Answer:
(c) 20 companies

Question 2.
Which _________ Director is appointed by a Financial institution.
(a) Nominee
(b) Additional
(c) Women
(d) Shadow
Answer:
(a) Nominee

Question 3.
A Private Company shall have a minimum of:
(a) Seven directors
(b) Five directors
(c) Three directors
(d) Two directors
Answer:
(d) Two directors

Question 4.
A Public Company shall have a minimum of _________ Directors.
(a) Twelve
(b) Seven
(c) Three
(d) Two
Answer:
(c) Three

Question 5.
A Public Company having a paid up Share Capital of ₹ _________ or more may have a Director, elected by such small shareholders.
(a) One
(b) Three
(c) Five
(d) Seven
Answer:
(c) Five

Question 6.
Under the companies Act, which one of the following powers can be exercised by the Board of Directors?
(a) Power to sell the company’s undertakings.
(b) Power to make call.
(c) Power to borrow money in excess of the paid up capital.
(d) Power to reappoint an auditor.
Answer:
(b) Power to make call.

Question 7.
Which director need not hold qualifying shares?
(a) Directors appointed to Central Government
(b) Directors appointed to Shareholders.
(c) Directors appointed to Managing Director
(d) Directors appointed to Board of Directors
Answer:
(a) Directors appointed to Central Government

Question 8.
What is the statue of Directors who regulate money of the company?
(a) Banker
(b) Holder
(c) Agent
(d) Trustees
Answer:
(d) Trustees

Question 9.
According to Companies Act, the Directors must be appointed by the:
(a) Central Government
(b) Company Law Tribunal
(c) Company in General Meeting
(d) Board of Directors
Answer:
(c) Company in General Meeting

Question 10.
The Board of Directors can exercise the power to appoint directors in the case of:
(a) Additional Directors
(b) Filling up the Casual vacancy
(c) Alternate Directors
(d) All the above
Answer:
(d) All the above

TN Board 12th Commerce Important Questions

TN Board 12th Commerce Important Questions Chapter 26 Companies Act, 2013

November 2, 2021

TN State Board 12th Commerce Important Questions Chapter 26 Companies Act, 2013

Question 1.
Who is called as Promoters?
Answer:
The person who envisage the idea is called a promoter section 2 (69) of the companies Act 2013 defines the term promoter as follows who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92.

Question 2.
What is Shares?
Answer:
The term share is viewed by a layman as a fraction or portion of total capital of the company which have equal denomination. In simple, the total capital of the company is shared by many person and each share is having equal value.

Question 3.
What do you mean by Equity Share?
Answer:
Those shares which are not called as preference share are known as equity share or the share of a company which do not have any preferential rights with regard to dividend and repayment of share capital at the time of liquidation of a company. Share are part of the capital of a company.

Question 4.
What do you understand by Preference Share?
Answer:
Section 42 of the companies Act, 2013 the term “Preference shares” mean that part of the share capital the holders of which have preferential right over payment of dividend (fixed amount or rate) and repayment of share capital in the event of winding up of the company.

Question 5.
What is Sweat Equity Shares?
Answer:
Sweat equity shares means issue of shares to employees or directors at a lower price for cash or other than cash, in lieu of providing know how or making available rights in the nature of intellectual property rights or any value additions.

Question 6.
What is Bonus Shares?
Answer:
Bonus shares, means to utilize the company’s reserves and surpluses, issue of shares to existing share holders without taking any consideration is known as bonus share.

Question 7.
What is Right Shares?
Answer:
Right shares are the shares which are issued by the company within the aim of increasing the subscribed share capital of the company by further issue if it is authorized by its articles.
The right shares are primarily issued to the existing equity share holders through a letter of an issue, on pro rata basis.

Question 8.
What is Private placement?
Answer:
Private placement means offer of securities or invitation to subscribe to securities to select group of persons through private placement offer letter. The number of subscribers under private placement should not exceed 50 members or such numbers prescribed.

Question 9.
Define Share Warrant.
Answer:
A share warrant is a negotiable instrument issued by the public limited company only against fully paid up shares. It is also termed as a document of title because the holder of the share warrant is entitled to the number of shares mentioned in it.

Question 10.
What is Debentures?
Answer:
When a company needs funds for extension and extension and development purpose without increasing its share capital, it can borrow from the general public by issuing certificates for a fixed period of time and at a fixed rate of interest. Such a loan certificate is called a benture.

Question 11.
Distinguish between shares and stocks.
Answer:

Shares	Stock
Share are part of the capital of a company.	A company can convert it share into stock.
A share is the smallest unit into which the company’s capital is divided representing the ownership of share holders.	The denomination of stock differs.
Share can be partly or fully paid up.	Stock can only be fully paid up shares.
Shares are of equal denomination.	When share are transformed into stock

Question 12.
What do you understand by Issue of Securities at Premium?
Answer:

The amount of share premium has to be transferred to an account called the “Securities premium account”. This account is capital in nature and can only be utilized for the purposes specified by the Act (under section 78), Issue of fully paid bonus shares to members of the company.
Securities premium Account cannot be treated as a revenue reserve for distributing dividends. It can only be used for the above mentioned purposes and also for buying back of securities (section 77A). It must be noted that security premium is not available for the distribution of dividend.

Question 13.
What is issue of shares at discount? What conditions should be fulfilled?
Answer:

When shares are issued at a price above the face value or nominal value they are said to be issued at a premium.
When the shares are issued at a price below the face value they are said to be issued at a discount.
Issue of fully paid bonus shares to members of the company.
(a) To write preliminary expenses.
(b) To write off the expenses of issue or commission paid or discount allowed on issue of shares or debentures of the company.

Question 14.
State condition stipulated for capital subscription at the time of promotion.
Answer:

The fulfilling formalities to raise necessary capital.
Adhering to SEBI guidelines in this regard.
Observing guidelines for disclosure and investor protection issued by SEBI.
Issuing prospectus
Fulfilling the condition for valid allotment by director.
Ensuring collection of minimum subscription.

Question 15.
Explain different Kinds of Preference shares.
Answer:
There are eight types of preference shares. Incase of dissolution of the company any of the eight types would be paid out before other types of equity.
(i) Cumulative preference shares:
As the word indicates, all dividends are carried forward until specified and paid out only at the end of the specific period.

(ii) Non-cumulative preference shares:
Dividends are paid out of profits for every year. There are no arrears carried over a time period to be paid at the end of term.

(iii) Non redeemable preference shares:
Such shares cannot be redeemed during the life time of the company, but can only be obtained at the time of winding up (liquidation) of assets.

(iv) Redeemable preference shares:
Such preference shares can be claimed after a fixed period or after giving due notice.

(v) Convertible preference shares:
The shares can be converted into equity shares after a time period or as per the conditions laid down in the terms.

(vi) Non-convertible preference shares:
Non-convertible preference shares cannot be at anytime converted into equity shares.

Question 16.
Write the difference between Debentures and Shares.
Answer:

Debentures	Shares
Debentures constitute a loan.	Shares are part of the capital of a company
Middle and lower level	Top level
Debenture holder gets fixed rate of interest which carries a priorities over dividend.	Shareholders gets dividends with a varying rate.
Debentures generally have a charge on the assets of the company.	Shares do not carry any such charge.
Debentures can be issued at a discount without restrictions.	Shares cannot be issued at a discount.
The rate of interest is fixed in the case of debentures.	Whereas on equity shares, the dividend varies from year to year depending upon the profit of the company and the Board of directors decision to declare dividends or not.
Debenture holders do not have any voting right.	Share holders enjoy voting right.
Interest on debenture is payable even if there are no profits i.e., even out of capital.	Dividend can be paid to shareholders only out of the profits of the company and not otherwise.
Interest paid on debenture is a business expenditure and allowable deduction from profits.	Dividend is not allowable deduction as business expenditure.
Return of allotment is not required for allotment of debentures.	Return of allotment in e Form No.2 is to be filed for allotment of shares.

Question 17.
Brief different stages in Formation of a Company.
Answer:
Formation of a company has been divided into four stages,
(i) Promotion
(ii) Registration
(iii) Capital Subscription
(iv) Commencement of business
Out of the four stages the first two stages promotion and registrations are necessary for both public and private companies.
(a) A private company can start operating its business immediately after the registration, but a public company has to pass through two more stages capital subscription and commencement of business.
(b) A public company can raise the funds from the public by issuing shares. After following all the legal provision of public issue, which are specified in the Company’s Act, a public company can start operating of its business.

Question 18.
What are the various kinds of Debentures?
Answer:
Debentures are generally classified into different categories on the basis of,
(i) Convertibility of the instrument
(ii) Security of the instrument
(iii) Redemption ability
(iv) Registration of Instrument

(i) On the basis of convertibility:
(a) Non-convertible debentures:
These instruments retain the debt character and cannot be converted in to equity shares

(b) Partly convertible debentures:
A part of these instruments are converted into equity shares in the future at notice of the issuer.

(c) Fully convertible debentures:
These are fully convertible into equity shares at the issuer’s notice. The ratio of conversion is decided by the issuer.

(d) Optional convertible debentures:
The investor has the option to either convert these debentures into shares at a price decided by the issuer agreed upon at the time of issue.

(ii) On the basis of security debentures:
(a) Secured debentures:
These instruments are secured by a charge on the fixed assets of the issuer company.

(b) Unsecured debentures:
These instruments are unsecured in the sense that if the issuer defaults on payment of the interest or principal amount the investor has to be included as unsecured creditors of the company.

(c) Redeemable debentures:
It refers to debentures which are issued with a condition that the debentures will be redeemable at a fixed date or upon demand.

(d) Perpetual or irredeemable debentures:
A debenture in which no specific time is specified by the companies to pay back the money is called irredeemable debenture on the basis of registration.

(e) A registered debentures:
Registered debentures are issued in the name of a particular person whose name appears on the debenture certificate and who is registered by the company as holder on the register of debenture holders.

(f) Bearer debentures:
Bearer debentures are issued to bearer, and are negotiable instruments and so transferable by mere delivery like share warrants.

Question 19.
What formalities need to be fulfilled for a companies having share capital to commence business?
Answer:
As per section 11 of the Act a company having share capital should file with registrar declaration stating that
(i) Every subscriber to the memorandum has paid the value of shares agreed to be taken by him.
(ii) Paid up capital is not less than ? 5 lakhs in the case of public limited company and ? 1 lakh in the case of private limited company.
(iii) It has filed the Registrar the verification of the registered office.
These restriction in section 11 are applicable to companies having share capital. It can commence business only after fulfilling all the formalities mentioned above and exercise borrowing powers immediately after incorporation.

Question 20.
Write the difference between Share Certificate and Share Warrant.
Answer:

Share certificate	Share warrant
It is a written document prepared by the company under its common seal.	It is an instrument which signifies that the holder of the instrument is entitle to the shares mentioned in it.
Sent to the members it containing the number of shares held by him/ her the amount paid thereon.	It is a bearer document which can be transferred by mere delivery.
Document work as an evidence for the ownership of shares of the shareholder.	Only public limited companies have the right to issue share warrant.

Choose the correct answer:

Question 1.
The Company will have to issue the notice of situation of Registered Office to the Registrar of Companies within ___________ days from the date of incorporation.
(a) 14 days
(b) 21 days
(c) 30 Days
(d) 60 Days
Answer:
(c) 30 Days

Question 2.
How does a person who envisages the idea to form a company called?
(a) Director
(b) Company Secretary
(c) Registrar
(d) Promoter
Answer:
(d) Promoter

Question 3.
For which type of capital a company pays the prescribed fees at the time of registration?
(a) Subscribed Capital
(b) Authorised Capital
(c) Paid-up Capital
(d) Issued Capital
Answer:
(b) Authorised Capital

Question 4.
Which of the following types of shares are issued by a company to raise capital from the existing shareholders?
(a) Equity Shares
(b) Rights Shares
(c) Preference Shares
(d) Bonus Shares
Answer:
(b) Rights Shares

Question 5.
Specify the type of resolution to be passed to choose the location of Registered Office of the company within the town or village or city:
(a) Ordinary
(b) Special
(c) Either Ordinary
(d) Board or Special
Answer:
(d) Board or Special

Question 6.
Who can issue stock?
(a) Public
(b) Private
(c) One Person
(d) Small
Answer:
(a) Public

Question 7.
Specify the document which comes under the Negotiable Instrument Act.
(a) Share Certificate
(b) Share
(c) Share Warrant
(d) Stock
Answer:
(c) Share Warrant

Question 8.
The shares which are offered to the existing shareholder at free of cost is known as:
(a) Bonus Share
(b) Equity Share
(c) Right Share
(d) Preference Share
Answer:
(a) Bonus Share

Question 9.
The shares which are offered first to the existing shareholder at reduced price is known as:
(a) Bonus Share
(b) Equity Share
(c) Right Share
(d) Preference Share
Answer:
(c) Right Share

Question 10.
The Companies Act 2013 Prohibits the issue of shares at to the public.
(a) Premium
(b) Par
(c) Discount
(d) Both at par and Premium
Answer:
(c) Discount

TN Board 12th Commerce Important Questions

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