Previous Year Papers
Economics - 1998
( I.C.S.E)
(b) Give two characteristics of the Green Revolution.
(c) Define the role of capital in production.
(d) Mention two features of a mixed economy.
SECTION -A
Ans. (a)Commercial banks can lend money in various ways such as :-
(i)Cash Credit : Where debtor is allowed to with draw a certain amount on a given security and interest is charged only on the amount actually withdrawn.
(ii)Over Draft : Where clients having current account with the bank are allowed to withdraw more money than is lying in their account.
(iii)Loans : Where clients are allowed to withdraw a fixed amount any time and interest is charged on whole amount.
(iv) Discounting of Bill of Exchange : Where banks give advance to their client on the basis of maturity of bill of exchange and charges discount.
Ans. (b) A Green revolution is a revolution both in quantum of agricultural input and output.
(i)Increase in Production : There is significant increase in production of food grains at a very fast rate and production came to 950 Lac tons in the year 1955-56.
(ii)Economic Development : Before Green Revolution the important of agriculture in economic development was not realized. But Green Revolution wiped out all these illusions.
Ans. (c)Capital is the produced means of production. Capital plays an important role in production which can be explained as below :-
(i)Economic development is not possible without sufficient capital stock such as machinery, factory, equipment etc.
(ii)Capital helps in providing employment to the people.
(iii) Production in not possible without capital. Capital helps in increasing the production.
Ans. (d)Mixed economy is an economy where features of socialistic and capitalistic economy co-exist.
Features :-
(i)Both Government and Private Sector :- In this economy both the sector private and public are engaged in production and other economic activities. Some areas are reserved only for the Government but in some areas any sector can work.
(ii)Control and Relaxation :- In some areas entrepreneurs are free to produce what ever they like and charge any price, they want. But in some areas government makes use of strict controls over product, price, distribution etc.
Q 2. (a) Distinguish between Simple and Complex Division of Labour.
(b) Explain how division of labour islimited by the extent of the market.
(c) How does rapid growth of population aggravate the food problem ?
(d) Mention two causes for the low productivity of Indian agriculture.
Ans.(a) Division of labour is a technique to divide the complicated work into smaller parts. It may be of two types :-
(i)Simple : In this type of division of labour, the labourer does only one kind of job and depends on others for meeting other requirements. Such as - teachers, lawyers etc.
(ii)Complex : In this type of division of labour, a particular job is further divided into many processes and each process is carried on by different workers. such as - Manufacturing of a car is subdivided into many activities.
Ans. (b) Division of labour is limited by the extent of market. If the size of market of a product is small, demand for product will be less and so as the production. In such a case, it will not be possible to go for complex division of labour as it may be expensive for entrepreneur. But if the size of market of product is large, demand for product will be high and so as the production. In such a case, production is done on large scale and it is both - possible and profitable to go for complex division of labour.
Ans. (c) Food problem arises only when the supply of food grains falls short of demand for food grains.Rapid growth of population aggravates the food problem. During the last forty years, population has increased at a faster pace than production. As a result there are crores of people looking for their life on handful crops. The continuous growth of population is posing a serious threat to the country because this is main cause of food shortage in India.
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Ans. (d) In India agricultural productivity is very low. Some of the factors responsible for the low productivity can be explained as below :-
(i) Lack of Irrigation Facilities : In spite of vigorous programme of major and minor irrigation works during the plans, only 29% of total sown area has the benefit of assured irrigation.
(ii) Old Techniques of Production : Indian farmers are conservative, they are still using old techniques of production which are inefficient. They do not adopt modern methods which otherwise can enhance the productivity.
Q 3. (a) State the factors which determine the creation of savings in a country.
(b) Mention two factors which determine the supply of labour in a country.
(c) State any two drawbacks of State enterprises.
(d) Give two features of sole proprietorship.
Ans. (a) "Saving is basically the non-consumption of income." - Peterson
Factors :-
(i)Will to save : When people have intense desire to save, they will save more and those who do not want to save, will either save nothing or save very less.
(ii)Power to save : Power to save is the capacity to save and it depends on income Higher the capacity to save, higher the chances of saving.
(iii)Facilities to save : If people have money to save and are ready to save but they do not know where and how to save, they will not be encouraged to save. If the facilities to save such as banking etc. are wide spread, people will be motivated to save.
Ans. (b) Supply of labour means number of people who are ready to work at a given wage level.
Factors :-
(i)Size and Growth of Population : When in a country birth rate is very high and depth rate is very low, then population will grow faster and supply of labour will increase.
(ii)Migration and Immigration : When the tendency of migration and immigration increases, supply of labour decreases.
Ans. (c) State enterprises are those enterprises which are owned by state.
Drawbacks :-
(i)Bureaucracy : The administration of public enterprises remains in the hands of paid officials whoshirk responsibility and are influenced by political persons, they work in a bureaucratic manner.
(ii)Red Tapism : State enterprises do not get any share out of profit of the enterprise, these are rot with worst type of Red tapism , corruption, favoritism etc. which hinder the progress of these enterprises.
Ans. (d) When a business unit is owned and managed by a single individual, its owner, is known as the sole proprietor.
Features :-
(I)Entity : In sole proprietor there is no difference between ownership and management as the owner himself manages the business.
(ii)Unlimited Liability : In sole proprietor, the liability of proprietor is unlimited. In case, there is loss in business, he may have to sell his property to clear the debt and other obligations of business.
Q 4. (a) Differentiate between Sunk Capital and Floating Capital.
(b) Give two factors that show the importance of agriculture for industrial development.
(c) Mention two advantages of a bank account.
(d) Examine any two major problems of the Jute Industry in India.
Ans. (a)Capital is the produced mean of production.
(I) Sunk capital is the capital which can produce only one commodity and can't be put to various uses. Such as :-In the ice factory, machines and buildings used to produce ice can't be used in production of anything else. So, these are sunk capital.
(ii) Floating capital is the capital which can be put to alternative uses. such as :- money, fuel, etc.
Ans. (b) Agriculture plays on important role in industrial development which can be explained as below :-
(I) For industrial development, there is need to buy latest machinery etc. from foreign countries. For this foreign exchange is required which can be acquired through export of agricultural goods.
(ii) More over some of the industries use agricultural products as inputs. such as : Textile industry is based on cotton, Sugar industry is based on sugar cane which are agricultural products.
Ans. (c) Bank accounts are just like having money in hand as one can withdraw money whenever required and make use of it, More over bank interest is additional advantage to have money in bank account. Additional facilities, such as : Bank overdrafts etc. are to be provided only to the industrialists having bank account . So, it is better to have a bank account.
Ans. (d) Jute industry is facing many problems in India. Some of them can be explained as below :-
(I)Shortage and irregular supply of raw material : Raw material of jute industry is agricultural product which requires special environment to grow. It is being sown only in selective areas in India. But demand for jute is very high. Shortage of good quality of jute hampers the growth of jute industry.
(ii)Competition : Jute industry is also facing a problem of world wide competition not only from other producers of jute but also from it's substitutes. Such as - Artificial fiber.
SECTION - B
Answer any four questions from this Section.
Q 5. (a) What is the meaning of "land" in economic terms ? Discuss any four peculiarities of land as a factor of production.
(b) Discuss the importance of Small Scale Industries and Cottage Industries in the Indian economy.
Ans. (a) Land is the primary factor of production because land is needed for starting any type of production.
Definition :-
"By land means the material goods and the resources which 'nature' gives freely for man's aid, in land and water, in air and light and heat"- Marshall
Peculiarities :-
(I) Fixed supply : Total land supplied by nature can not be increased. The only way to increase its supply is to make intense use of land.
(ii) Free gift of nature : Land is free gift of nature. Man has paid nothing to God for this.
(iii) Indestructible factor : Land cannot be destroyed, but its shapes can be changed and its productivity can also change.
(iv) Passive factor : Land is a passive factor of production because it cannot produce any thing by itself and man has to invest money and apply labour to get production from it.
Ans(b). Cottage and small scale industries play an important role in Indian economy which can be explained as below :
(i) Equitable Distribution of Wealth : Growth of cottage and small scale industries has resulted in a rise in the income of many people by providing them employment .It leads to equitable distribution of wealth.
(ii) Labor intensive: These industries are labor intensive industries and provide employment to a large number of people.
(iii) Mobilization of savings: Idle savings of Indians can be utilized in these productive activities. These industries prove to be good means of mobilization of growing savings, talent and skill.
(iv) Promote regional development :These industries can be started in all parts of the country and these play a major role in bringing about the proper regional development in the country and the country needs it.
Moreover it helps in decentralization of urbanization, requires lesser capital and lesser imports and technical knowledge and these industries provide finished goods in a shorter period, which are very important in case of an underdeveloped country like India.
Q6 (a) Explain briefly the meaning of efficiency of labor and state four factors which determine the efficiency of labor.
(b) What is meant by "agriculture labor" ? Give four reasons for the rapid growth of agricultural labor in India.
Ans. (a) Efficiency of labor is quality or ability of a worker to produce more and better quality of goods in a specified time under some given conditions.
Definition : "Efficiency of labor means the capacity of worker to produce."
Factors :
(1) Workers of cool temperature regions are more efficient then the workers of tropical regions having hot and moist climate.
(2) People of some region are more efficient than others. Such as people of Punjab are more efficient.
(3) A sincere, honest and intelligent worker is more efficient.
(4)Educated workers are more efficient.
(5)Modern and good quality machinery increases the efficiency of workers.
(6)Long hours of work decreases the efficiency of workers.
(7)Healthy working environment increases the efficiency of workers.
Similarly experience, favorable social and political situations, fair wages and timely payment of wages etc increases the efficiency of labor.
Ans. (b) All those persons who derive a major part of their income as payment for work performed on the farms of others, can be designated as agricultural labour.
Reasons for Rapid Growth of Agricultural labour :-
(i)Capitalist Agriculture :- Pricing Policy of Govt., abolition of intermediaries, expansion of marketing have given rise to capitalist agriculture . A capitalist is in a position to compel the small holders of land to lower their prices which forced them to seek employment.
(ii) Increased Population :- During the last decade, population in India has increased at a fast pace which has given rise to unemployment . The unemployed persons join as agricultural labour to earn their livelihood
(3) Uneconomic Holdings :- The law of inheritance and decline of joint family system resulted in sub-division and fragmentation of holdings and uneconomical which forced small farmers to work on the farm.
(4) Increase in Indebtedness :- There has been increase in indebtedness of small farmers. As they are unable to return the loan to money lenders, they are forced to work as tenants or work as agricultural labour.
Q.7 (a) Describe the quantitative method of credit control adopted by the central bank to control credit.
(b) What are the co-operative societies? Explain the three different ways in which is co-operative are organized in India.
Ans.(a)Policy of credit expansion and credit contraction is known as credit creation. Policies of credit control are of two types quantitative and qualitative.
Quantitative Techniques:- Quantitative techniques are method of controlling the total volume of credit with the help of bank rate , open market operation, change in cash reserve ratio and Liquidity Ratio .
(1)Bank Rate :- Bank rate is the rate of interest at which the central bank rediscount the first class securities of other banks. Whenever central bank wants to expand credit it lowers the bank rate.
(2) Open Market Operations:- Open Market operation refers to the sale and purchase of Government securities by the Central Bank in open market .When the central bank wants to contract the credit, it begins to sell the securities in the open market. When the central bank wants to expand credit, it begins to buy the securities in open market.
(3) Cash Reserve Ratio:- Cash reserve ratio specifies the percentage of their total deposits, the commercial banks must keep with central bank . Higher the cash reserve ratio, lower will be the capacity of the commercial banks to create credit . When central banks wants to contract the credit , it increases the cash reserve ratio and when it wants to expand the credit, it decreases the cash reserve ratio.
(4)Statutory Liquid Ratio:- This Ratio specifies the percentage of total deposits, commercial banks must keep in liquid form such as cash. Higher the Ratio, the lesser will be the capacity of commercial banks to create credit . When central banks wants to contract the credit , it increases statutory liquid ratio and when it wants to expand credit, it decreases the statutory Liquid Ratio.
Ans (b) Co-operative societies are based on principle of self help through mutual help and gave moral and human touch to commercial activities .
Definition:- " Co-operative organization is an association of weak who, gather together for a common economic need and try to lift themselves from weakness into strength through business organization.""Talmaki"
Types of co-operatives Societies:-
(1)Consumer's co-operative:- These societies are to be formed to supply consumer goods of standard quality to their members at fair prices. The consumers of a locality or town collect the necessary capital through share and start a consumer co-operative store.
(2)Credit co-operatives:- These societies are formed to render the financial help to their members at reasonable rate of interest such as agricultural credit co-operative society etc.
(3) Industrial Co-operative societies :- Producers jointly form industrial co-operative societies . They raise capital for society, elect the manager, undertake the risks, share profit and loss.
(4) Co-operatives Housing societies:- These societies are formed to provide cheap houses to the members.
Q8. (a) How is a Joint Stock Company formed ? In what four respects does a Joint Stock Company differ from a Partnership?
(b) Discuss two objectives of land reform and give a brief account of tenancy reforms in India.
Ans: (a) "A Joint Stock Company" is an artificial person created by law , having a separate entity with a perpetual succession and a common seal."
Companies Act:-Steps in formation of a joint stock company
(1) Preparation of memorandum of association
(2) Preparation of article of association .
(3) Apply for Registration with Registrar of companies
(4) Certificate of Incorporation
Private company can go for commencement of business immediately after getting the certificate of incorporation. But a public company has to undergo another two steps.
(5) Issue of prospectus.
(6) certificate of commencement of business .
S.No. / Criteria / Joint Stock company / Partnership
1
2
3. .
4 / Liability
Entity
Minimum number of members
Perpetual succession / Limited
Separate legal entity
7
It is not being affected by death of its members / Unlimited
Partnership and firm are same thing with respect to liability
2
It ends with the death of its members
Ans (b) Land reform measures are concerned with the abolition of intermediaries under Zamindari system, improvement in the conditions of tenancy, ceiling on holding of land and distribution of surplus land and consolidation of the small and scattered pieces of land.
Objectives:
(1)The agrarian structure should not obstruct the growth of agriculture . It should rather promote the growth of agriculture.
(2) The old land system should be replaced by a new one . The land system should be free from exploitation.
Tenancy Reform:- It was being realized that even the abolition of intermediaries does not necessarily mean abolition of tenants, because these intermediaries do not necessarily cultivate the land themselves . Realising the seriousness of tenancy problem, elaborate tenancy, legislation has been passed in almost all the states in recent years such as mentioned below.