Answer Key with Explanation | Commerce | CBSE UGC NET | Paper 2 | 5th November 2017

Here Navdeep Kaur is providing Answer Key with Explanation for Commerce CBSE UGC NET held on 5th November 2017

Business Environment

1. From the following statements of Assertion (A) and Reasoning (R), indicate the correct code :

Assertion (A) : Industrial liberalisation became an imperative condition for the growth of forces of competition leading to high efficiency and productivity in Indian

industries.

Reasoning (R) : Industrial development and curbing of poverty

is only possible through government intervention.

Code :

(1) (A) and (R) both are not correct.

(2) (A) is correct but (R) is not the correct explanation of (A).

(3) (A) is correct and (R) is correct explanation of (A).

(4) (A) is not correct but (R) is correct.

The new policies have liberalized many government controls on production capacity, imported capital goods, intermediate inputs and technology. The main thrust of these reforms has been on openness, that is, import liberalisation and removing barriers to exports.

2. Which of the following statements are not correct ?

Statement (I) : Sustainable development means an attempt to achieve the balance between economic growth and conservation / protection of environment.

Statement (II) : Sustainable development means meeting the needs of industries without compromising the needs of import - export balancing.

Statement (III) : Sustainable development means creation of sufficient surplus budgets through stock of capital assets including land.

Code : (1) Statements (I) and (III)

(2) Statements (II) and (III)

(3) Statements (I) and (II)

(4) Statements (I), (II) and (III)

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

3. Match items of List - I with List - II relating to macro environment of business and indicate the code of correct matching : List - I List - II

(a) Economic environment          (i) Ethical issues

(b) Political and government        (ii) Trade and transport policies environment

(c) Socio - cultural environment   (iii) Economic stratification of population

(d) Demographic environment      (iv) Judiciary powers

Code : (a) (b) (c) (d)

(1) (ii) (iv) (i) (iii)

(2) (i) (iii) (ii) (iv)

(3) (iv) (ii) (iii) (i)

(4) (iii) (i) (iv) (ii)

Socio-cultural environment is a collection of social factors affecting a business and includes social traditions, values and beliefs, level of literacy and education, the ethical standards and state of society, the extent of social stratification, conflict and cohesiveness, and so forth

4. For which one of the basic reasons, the “Structural Adjustment Programme” was undertaken in India in 1991 ?

(1) Curbing competition among private sector

(2) Establishing predominant role of public sector

(3) Establishing a free market economy

(4) Regional balancing through planning and licensing

In 1991, India faced an unprecedented balance of payments crisis.

Important element of new economic policy is the adoption of what are called Structural Adjustment Reforms which sought to change the nature of Indian economic system by ultimately establishing a free market economy. Under this structural adjustment programme, the role of public sector in economic development had been diluted and that of private sector enhanced and expanded.

5 Match the items of List - I with List - II and indicate the correct code of matching : List - I List - II

(a) Micro external environment (i) Economic and political factors

(b) Macro external environment (ii) Competition among diverse products targeting disposable income of consumers

(c) Non - price competition (iii) Input suppliers

(d) Desire competition (iv) Sponsoring of events like sports

Code : (a) (b) (c) (d)

(1) (iii) (i) (iv) (ii)

(2) (ii) (iii) (iv) (i)

(3) (iv) (ii) (iii) (i)

(4) (iv) (i) (ii) (iii)

Important factors or forces of micro-level external environment.

1. Suppliers of Inputs
2. Customers
3. Marketing Intermediaries
4. Competitors
5. Publics

External macro-environmental factors are classified into:

(1) Economic,

(2) Social,

(3) Techno­logical,

(4) Political and legal, and

(5) Demographic.

Some firms sponsor events (sporting, cultural) to be identified with something worthwhile, at the same time as getting media exposure for their brand name.

• Rebel Sport Super 14
• Heineken Open (tennis)

Accounts

6. Assertion (A) : Debt - equity ratio indicates the long term solvency of a company.

Reasoning (R) : It measures the ability of the company to pay off its long term liabilities.

Select the correct answer from the code given below :

(1) Both (A) and (R) are correct and (R) is the correct reason for (A).

(2) Both (A) and (R) are correct but (R) does not explain (A) correctly.

(3) (A) is correct but (R) is wrong.

(4) (A) is wrong but (R) is correct.

Types of Long Term Solvency (Liquidity) Ratios

To check the ability of the company of meeting its long term obligations following ratios are used.

• Interest Coverage Ratio
• Debt / Equity Ratio

7 The balance of property at cost has been Rs 20,000 and Rs 17,000 in 2015 and 2016 respectively. The profit on sale of property of Rs 2000 is credited to Capital Reserves Account. New property costing Rs 5000 bought in 2016. Determine sale of proceeds from Property.

(1) ` 3,000 (2) ` 7,000 (3) ` 10,000 (4) ` 15,000

20,000+2000+5000-17,000 =10,000

8. Goodwill of a firm of X and Y is valued at ` 30,000. It is appearing in the books at ` 12,000. Z is admitted for 1/4 share. What amount he is supposed to bring for goodwill ?

(1) ` 3,000

(2) ` 4,500

(3) ` 7,500

(4) ` 10,500

30000/4= 7500

9. A Ltd. issued a prospectus inviting applications for 2,000 shares. Applications were received for 3,000 shares and pro-rata allotment was made on the applications of 2,400 shares. If A has been allotted 40 shares, how many shares he must have applied for ?

(1) 40

(2) 44

(3) 48

(4) 52

2400 x 40

2000

10. Which one of the following receipts is of revenue nature ?

(1) Amount realised from the sale of investments

(2) Dividend received on investment

(3) Amount borrowed from a bank

(4) Compensation received from municipal corporation for the acquisition of land for the construction of road.

11. Statement (I) : Business decision makers deal with the complex, rather chaotic, business conditions of the real world and have to find the way to their destination, i.e, achieving the goal that they set for themselves.

Statement (II) : Even without application of economic logic and tools of analysis, business decisions are always rational and real and are not counter productive.

Code :

(1) Both the statements are correct.

(2) Both the statements are incorrect.

(3) Statement (I) is correct while statement (II) is incorrect.

(4) Statement (I) is incorrect while statement (II) is correct.

12. Which one of the following statements is true ?

(1) Pure profit is the return in excess of the opportunity cost

(2) Accounting profit is the excess of total revenue over and above the explicit and implicit costs

(3) Profit maximization is the sole objective of the modern firms

(4) Profit is maximum when the difference between marginal revenue and marginal cost is maximum

Pure profit or economic profit is profit that is determined by capturing the explicit and implicit costs or what are generally known as opportunity costs.

Accounting profit is a company's total earnings, calculated according to generally acceptedaccounting principles (GAAP). It includes the explicit costs of doing business, such as operating expenses, depreciation, interest and taxes.

13. Which one of the following is not the assumption on which the theory of consumer behaviour is based on the cardinal utility approach ?

(1) Rationality

(2) Constant marginal utility from successive units

(3) Constant marginal utility of money

(4) Utility is measurable

The cardinal utility approach used in analyzing the consumer behavior depends on the following assumptions

• Rationality
• Limited Resources (Money)
• Maximize Satisfaction
• Utility is cardinally Measurable: 1 Util = 1 unit of money.
• Diminishing Marginal Utility
• Marginal Utility of Money is Constant
• Utility is Additive

14 Statement (I) : Point price elasticity of demand in terms of marginal and average revenues can be measured with the following formula :

AR

AR−MR

Statement (II) : The point price elasticity of demand is the product of the slope of the demand function and the ratio between corresponding price and quantity.

Code :

(1) Both the statements are correct.

(2) Both the statements are incorrect.

(3) Statement (I) is correct while statement (II) is incorrect.

(4) Statement (I) is incorrect while statement (II) is correct

15. Which one of the following is not the basic property of indifference curves ?

(1) Negative slope

(2) Indifference curves of two imperfect substitutes are concave to the point of origin

(3) The indifference curves do not intersect nor are they tangent to one another

(4) Upper indifference curves indicate a higher levels of satisfaction

Statistics

16. The scale of measurement which has no order, distance and unique origin is known as which one of the following ?

(1) Nominal scale

(2) Ordinal scale

(3) Interval scale

(4) Ratio scale

Nominal Scale

From the Statistical point of view it is the lowest measurement level. Nominal Scale is assigned to items that is divided into categories without having any order or structure, for instance Colors do not have any assigned order, Example from research activities is a YES/NO scale, which is nominal. It has no order and there is no distance between YES and NO.

17. The formula to determine the number of classes given by Sturge’s Rule is which one of the

following ?

Where : K = Number of classes

N = Total number of observations

(log N) = Logarithm of the total number of observations

K=1+3.322logN

For Example: If the total number of observations is 50, the number of classes would be

K=1+3.322logN

K=1+3.322log50

K=1+3.322(1.69897)

K=1+5.644

K=6.644

18. Which one of the following is not the characteristics of normal distribution ?

(1) Bell - shaped and symmetric

(2) Mean, Median and Mode of the distribution are equal

(3) The total area under the curve for the normal probability distribution is one

(4) The two tails of the distribution in both the directions touches the horizontal axis

19. Assertion (A) : A reasonably sized sample drawn randomly from large sized population

contains almost all the characteristics which exist in the population.

Reasoning (R) : The theory of sampling is based on the two important laws of statistics,

viz., Law of statistical Regularity and law of inertia of large numbers.

Code :

(1) Both (A) and (R) are correct and (R) is the complete explanation of (A).

(2) Both (A) and (R) are correct but (R) is not the complete explanation of (A).

(3) (A) is not correct while (R) is correct.

(4) Both (A) and (R) are not correct.

The law of Statistical Regularity: It is a corollary to9 the main theory of probability which speaks of the mathematical expectations of the success, or failure of an event. Basing upon this, the Law of ‘Statistical regularity’ tells us that a random selection from a universe is likely to give a representative sample.

As such the law of statistical regularity rests on two important points viz.

1. Largeness of the sample size, and 2. Selection of the samples at random.

The law of inertia of large numbers: This law is an extension of the law of statistical regularity described above. According to this law “Large numbers are relatively more inert (constant) and stable than small ones, and therefore, other things remaining the same, as the sample size increases, the results tend to be more reliable and accurate.”

20. Statement (I) : If the alternative hypothesis is as Ha : μ ≠μ0 ; a researcher requires two -

tailed test in hypothesis - testing.

Statement (II) : The mean of the sampling distribution of mean is not equal to the parametric value of mean.

Code :

(1) Both the statements are true.

(2) Both the statements are false.

(3) Statement (I) is true, while statement (II) is false.

(4) Statement (I) is false, while statement (II) is true.

Upper-tailed, Lower-tailed, Two-tailed Tests

The research or alternative hypothesis can take one of three forms. An investigator might believe that the parameter has increased, decreased or changed. For example, an investigator might hypothesize:  

1. H1: μ > μ 0 , where μ0 is the comparator or null value (e.g., μ0 =191 in our example about weight in men in 2006) and an increase is hypothesized - this type of test is called an upper-tailed test;
2. H1: μ < μ0 , where a decrease is hypothesized and this is called a lower-tailed test; or
3. H1: μ ≠ μ 0, where a difference is hypothesized and this is called a two-tailed test.  

A parameter is a number describing a population, such as a percentage or proportion.

For large samples, we might expect that sample means will not stray too far

Management

21. Match the items of List - I with List - II ; and choose the correct code of combination :

List - I List - II

(a) The Fundamentals of Top Management    (i) Peter F. Drucker

(b) Middle Management                                    (ii) R.C. Davis

(c) The Essence of Management                     (iii) E.L.F. Brech

(d) Principles and Practice of Management    (iv) Mary Caushing Nile

Code :

(a) (b) (c) (d)

(1) (ii) (iv) (iii) (i)

(2) (ii) (iv) (i) (iii)

(3) (ii) (iii) (i) (iv)

(4) (iii) (iv) (i) (ii)

• The fundamentals of top management:  Ralph Currier Davis
• According to Mary C.Niles, middle managers have pressures from the corners, viz., (a) from above by his chief in top management with whose idea, policies and attitudes he must agree (b) From below by the supervisors who press for counsel  guidelines, decisions etc. and (c) sideways by colleagues whose departments or functions are interrelated with its own.
• The Essence of Management Coming together is a beginning, Keeping together is progress & Working together is success. - Henry Ford “Coordination is balancing and keeping together the team by ensuring suitable allocation of tasks tom the various members and seeing that the tasks are performed with harmony among the members themselves.- Edward Francis Leopold Brech
• Management by objectives (MBO), also known as management by results (MBR), was first popularized by Peter Drucker in his 1954 book The Practice of Management

22. Statement (I) : Management is not just a creature of the economy; it is a creator as well.

Statement (II) : He who can manage, can manage anything.

Code :

(1) Statement (I) is correct but (II) is incorrect.

(2) Statement (II) is correct but (I) is incorrect.

(3) Both the statements (I) and (II) are incorrect.

(4) Both the statements (I) and (II) are correct.

23. Assertion (A) : Due to these experiments (Time, Motion and Fatigue Studies ) a factory

does not remain a factory, it is converted into a laboratory.

Reasoning (R) : Management succeeds or fails as human relations in business are intelligently

or unintelligently handled.

Code :

(1) Both (A) and (R) are correct and (R) is the right explanation of (A).

(2) Both (A) and (R) are correct but (R) is not the right explanation of (A).

(3) (A) is correct but (R) is not correct.

(4) (R) is correct but (A) is not correct.

24. Who among the following is not associated with theories of motivation ?

(1) A.H. Maslow

(2) Cris Argyris

(3) Frederick Herzberg

(4) Peter F. Drucker

• Management by objectives (MBO), also known as management by results (MBR), was first popularized by Peter Drucker in his 1954 book The Practice of Management

25. As per the Herzberg’s Hygiene Theory of motivation, which among the following is not a motivational factor ?

(1) Recognition

(2) Working Conditions

(3) Responsibility

(4) Achievements

Two-factor theory distinguishes between:

Motivators (e.g. challenging work, recognition for one's achievement, responsibility, opportunity to do something meaningful, involvement in decision making, sense of importance to an organization) that give positive satisfaction, arising from intrinsic conditions of the job itself, such as recognition, achievement, or personal growth, and

Hygiene factors (e.g. status, job security, salary, fringe benefits, work conditions, good pay, paid insurance, vacations) that do not give positive satisfaction or lead to higher motivation, though dissatisfaction results from their absence. The term "hygiene" is used in the sense that these are maintenance factors. These are extrinsic to the work itself, and include aspects such as company policies, supervisory practices, or wages/salary. Herzberg often referred to hygiene factors as "KITA" factors, which is an acronym for "kick in the ass", the process of providing incentives or threat of punishment to make someone do something.

Marketing

26 When Walt Disney World’s Magic kingdom lets customers visit a fairy kingdom, a pirate ship, or a haunted house, then what is marketed in this example ?

(1) Services

(2) Events

(3) Experiences

(4) Ideas

27. Which one of the following statements is true according to VALS framework of psychographic segmentation ?

(1) The consumers who are primarily motivated by ideals are guided by knowledge and principles.

(2) The consumers who are motivated by achievement look for knowledge and principles.

(3) The consumers who are motivated by self expression don’t desire social or physical activity, variety, and risk.

(4) The consumers who are motivated by achievement desire social or physical activity, variety, and risk.

The main dimensions of the VALS framework are resources (the vertical dimension) and primary motivation (the horizontal dimension).

The vertical dimension segments people based on the degree to which they are innovative and have resources such as income, education, self-confidence, intelligence, leadership skills, and energy.

The horizontal dimension represents primary motivations and includes three distinct types:

• Consumers driven by knowledge and principles are motivated primarily by ideals. These consumers include groups called Thinkers and Believers.
• Consumers driven by demonstrating success to their peers are motivated primarily by achievement. These consumers include groups referred to as Achievers and Strivers.
• Consumers driven by a desire for social or physical activity, variety, and risk taking are motivated primarily by self-expression. These consumers include the groups known as Experiencers and Makers.

28 From the following two statements of Assertion (A) and Reason (R), indicate the correct code :

Assertion (A) : A transformational appeal of communication elaborates on a non-product related benefit or image.

Reasoning (R) : Transformational appeals often do not attempt to stir up emotions that will motivate purchase.

Code :

(1) (A) and (R) both are correct.

(2) (A) is correct (R) is not correct.

(3) (A) is not correct (R) is correct.

(4) (A) and (R) both are incorrect.

A transformational appeal elaborates on a non-product-related benefit or image. It might depict what kind of person uses a brand or what kind of experience results from the brand Transformational appeals often attempt to stir up emotions that will motivate purchase.

An informational appeal elaborates on product or service attributes or benefits. Informational appeals assume very rational processing of the communication on the part of the consumer.

29. Select the correct sequence for Hierarchy-of-effects model related to marketing communication :

(1) Awareness→ Knowledge → Liking → Preference→ Conviction → Purchase

(2) Knowledge → Awareness → Liking → Conviction → Preference → Purchase

(3) Awareness → Liking → Knowledge → Conviction → Preference → Purchase

(4) Liking → Awareness → Knowledge → Preference → Conviction → Purchase

Hierarchy of Effects Theory

• The hierarchy of effects model is a model which tells advertisers to make an advertisement in such a way that the customer goes through all these six stages namely awareness, knowledge, liking, preference, conviction and purchase.

• It is created by Robert J Lavidge and Gary A Steiner in 1961, the hierarchy of effects model suggests six steps to consumer buying behaviour.

30. Match the items of List - I with the items of List - II and denote the code of correct matching :List - I List - II

(a) Basic Product                              (i) Set of attributes and conditions buyers        normally expect

(b) Expected Product                (ii) Possible augmentation and transformation the product might undergo in future

(c) Augmented Product                                (iii) Exceed customer expectations

(d) Potential Product                         (iv) Converting core benefits into product

Code :(a) (b) (c) (d)

(1) (iii) (iv) (i) (ii)

(2) (i) (iii) (iv) (ii)

(3) (i) (iv) (iii) (ii)

(4) (iv) (i) (iii) (ii)

Finance

31. Which of the following statements is false ?

(1) The opportunity cost of an input is considered in capital budgeting

(2) Capital budgeting decisions are reversible in nature

(3) Cash flows and accounting profits are different

(4) An expansion decision is a capital budgeting decision

32. Match the items of List - I with those of List - II and indicate the correct code :

List - I List - II

(a) ABC Analysis                     (i) Dividend Decision

(b) Walter Model                      (ii) Capital Budgeting Decision

(c) Capital Rationing              (iii) Capital Structure Decision

(d) Net Operating Income      (iv) Working Capital Management Decision

Approach

Code :

(a) (b) (c) (d)

(1) (i) (iii) (ii) (iv)

(2) (ii) (i) (iii) (iv)

(3) (iv) (i) (ii) (iii)

(4) (iii) (i) (ii) (iv)

33. Main objective of employing Financial Leverage is to :

(1) Reduce the risk associated with profits

(2) Maintain the stability in profits

(3) Decrease the cost of debt capital

(4) Magnify the return on equity share capital

34. Which one of the following is not a method of calculating cost of equity capital ?

(1) Dividend yield method

(2) Dividend yield plus growth method

(3) Yield to maturity method

(4) Earnings yield method

To measure the cost of equity shares we have following ways:-

1) Dividend yield method or Price ratio method

2) Dividend yield plus growth in dividend method

3) Earning yield method

4) Realised yield method

35. Which one of the following equates the present value of cash out flows and the present value of expected cash inflows from a project ?

(1) Net Present Value

(2) Internal Rate of Return

(3) Pay back Period

(4) Accounting Rate of Return

HRM

36. Which one of the following is not true ?

(1) Material resources are subject to laws of mechanics and they cannot have an output greater than the input.

(2) Human resources are capable of exponential growth and development.

(3) Human resources cannot yield an output that may be far greater than what the value of their input warrants.

(4) In current scenario, gradually, the emphasis has shifted from muscle power to use of mind power.

37. The pluralistic approach of industrial conflict is based on which one of the following basic assumption / premise ?

(1) That conflict occurs when the tendency of industrial society is to treat worker as an isolated individual and deprive him of all control over his environment

(2) That an enterprise contain people with coalition of different interests

(3) That industrial conflict is a part of the broader social conflict between classes

(4) That no consensus is possible, in case of conflicts, because people are with different socio - cultural backgrounds.

Pluralistic-Perspective

• In pluralism the organization is perceived as being made up of powerful and divergent sub-groups - management and trade unions.
• This approach sees conflicts of interest and disagreements between managers and workers over the distribution of profits as normal and inescapable.
• Consequently, the role of management would lean less towards enforcing and controlling and more toward persuasion and co-ordination.
• Trade unions are deemed as legitimate representatives of employees. Conflict is dealt by collective bargaining and is viewed not necessarily as a bad thing and if managed could in fact be channeled towards evolution and positive change.
• Realistic managers should accept conflict to occur. There is a greater propensity for conflict rather than harmony.

38. The Job Description Index (JDI) Technique is used for measuring which one of the following ?

(1) Job attitudes

(2) Job descriptions/definitions

(3) Job analysis records

(4) Job skill requirements

The JDI and related scales are frequently used by academic researchers and workplace professionals as a means of measuring employee attitudes such as job satisfaction.

39. From the following two statements of Assertion (A) and Reasoning (R) indicate the correct code :

Assertion (A) : Development in HRM is a short-term educational process with temporary intervention.

Reasoning (R) : It is a educational process utilizing a systematic and organized procedure for development of operative employees performance in current jobs.

Code :

(1) (A) is correct and (R) is correct explanation of (A).

(2) (A) is correct, but (R) is not correct explanation of (A).

(3) (A) is not correct, but (R) is correct.

(4) (A) and (R) both are not correct.

40. Match items of List - I with List - II relating to methods of performance appraisal and indicate the correct code of matching.

List - I List - II

(a) Paired comparison method                    (i) Reviewing employee records and holding

interview on definite test questions.

(b) Forced choice description method                     (ii) Set of pair phrases or descriptive statements

(c) Critical Incidents method                      (iii) Differentiating between effective and non -effective performance on basis of achievements

(d) Field review method                                                           (iv) Relative ranking method

Code :

(a) (b) (c) (d)

(1) (iv) (ii) (iii) (i)

(2) (ii) (iii) (iv) (i)

(3) (iii) (i) (iv) (ii)

(4) (ii) (iv) (i) (iii)

Banking

41. Match the following items of List - I with the items of List - II and indicate the code of correct matching :

List - I List - II

(Name of organisation) (Year of establishment)

(a) IDBI              (i) 1956

(b) ICICI              (ii) 1955

(c) LIC of India   (iii) 1990

(d) SIDBI             (iv) 1964

Code :

(a) (b) (c) (d)

(1) (iii) (i) (ii) (iv)

(2) (iii) (i) (iv) (ii)

(3) (iv) (ii) (i) (iii)

(4) (i) (ii) (iii) (iv)

42. Statement (I) : Capital adequacy norms help banks in strengthening their capital base.

Statement (II) : Capital adequacy norms help banks in sanctioning more loans.

Code :

(1) Both the Statements (I) and (II) are correct.

(2) Both the Statements (I) and (II) are incorrect.

(3) Statement (I) is correct but (II) is incorrect.

(4) Statement (I) is incorrect but (II) is correct.

It is a measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures.

This ratio is used to protect depositors and promote stability and efficiency of financial systems around the world.

43. What is Hawala ?

(1) Tax evasion

(2) Illegal trading in stock exchanges

(3) Bank robbery

(4) Illegal transactions of foreign exchange

Hawala works by transferring money without actually moving it. In a hawala transaction , no physical movement of cash is there.

A traditional system of transferring money used in Arab countries and South Asia, whereby the money is paid to an agent who then instructs an associate in the relevant country or area to pay the final recipient.

Hawala has been made illegal in many countries, as it is seen to be a form of money laundering and can be used to move wealth anonymously. As hawala transactions are not routed through banks they cannot be regulated by the government agencies and have thus emerged as a major cause of concern.

44. Read the following events :

June 2012

(i) Capital adequacy norms for commercial banks

(ii) Establishment of IDBI

1964

(iii) Allowing convertibility of rupee at the market rate in the current account.

(iv) Nationalisation of general insurance business

Arrange the events in the ascending order of their occurrence :

(1) (i), (ii), (iii), (iv)

(2) (iv), (iii), (ii), (i)

(3) (iv), (ii), (i), (iii)

(4) (i), (ii), (iv), (iii)

In August 1994, the Government of India declared full convertibility of Rupee on Current account with announcing some relaxations as per requirements of the Article VIII of the IMF.

In the year 1992-93 the Narasimhan Committee submitted its first report and recommended that all the banks are required to have a minimum capital of 8% to the risk weighted assets of the banks. The ratio is known as Capital to Risk Assets Ratio (CRAR). All the 27 Public Sector Banks in India

(except UCO and Indian Bank)

had achieved the

Capital Adequacy Norm of 8% by March 1997.

Wrong Options

Answer: 2, 4, 1, 3

55 Indian insurance companies and 52 other general insurance operations of other companies were nationalized. It was incorporated on 22 November 1972

45. Assertion (A) : The future will see mostly the electronic money clearance through satellite networking.

Reasoning (R) : RBI is encouraging e-banking.

Code :

(1) (A) is true but (R) is false.

(2) (A) is false but (R) is true.

(3) Both (A) and (R) are true and (R) is the correct explanation of (A).

(4) Both (A) and (R) are true but (R) does not support (A).

International business

46. Statement (I) : Developing countries can borrow more than their quota under Extended Fund Facility (EFF) of IMF.

Statement (II) : The Extended Fund Facility (EFF) was created in 1984 to help the developing countries over longer period upto 3 years.

Code :

(1) Statement (I) is correct but (II) is not correct.

(2) Statement (II) is correct but (I) is not correct.

(3) Both the statements (I) and (II) are correct.

(4) Both the statements (I) and (II) are not correct.

The Extended Fund Facility was created in 1974 to help the developing countries over longer periods (upto 3 years) than stand-by arrangements (12-18 months). Further, in this facility developing countries can borrow more than their quota. The loans taken under this facility can be paid back over a period of 4-10 years.

47. Match the items of List - I with those of List - II; and choose the correct code of combination :

List - I List - II

(a) Poverty Reduction                                   (i) 1997

and Growth Facility(PRGF)

(b) Supplemental Reserve Facility (SRF)    (ii) 1974

(c) Extended Fund Facility(EFF)                  (iii) 1999

Code :

(a) (b) (c)

(1) (iii) (i) (ii)

(2) (iii) (ii) (i)

(3) (ii) (i) (iii)

(4) (i) (iii) (ii)

On December 17, 1997, the International Monetary Fund (IMF) Board approved the establishment of the Supplemental Reserve Facility (SRF),

SRF has been put in place to provide financial assistance to a member country experiencing exceptional balance of payments difficulties due to a large short-term financing need resulting from a sudden and disruptive loss of market confidence reflected in pressure on the capital account and the member's reserves.

In September 1999, the IMF established the Poverty Reduction and Growth Facility (PRGF) to make the objectives of poverty reduction and growth more central to lending operations in its poorest member countries.

The Extended Fund Facility was created in 1974 to help the developing countries over longer periods (upto 3 years) than stand-by arrangements (12-18 months). Further, in this facility developing countries can borrow more than their quota. The loans taken under this facility can be paid back over a period of 4-10 years.

48. Who among the following has given Absolute Advantage Model of international trade ?

(1) Adam Smith

(2) David Recardo

(3) Hackscher Ohlin

(4) William Petty

Adam Smith offered his own theory of Absolute Advantage. This theory believed that a nation should specialize in producing those goods that it can produce at a cheaper cost than that of other nations. These goods should be exchanged with other goods that are being cheaply produced by the other nations.

49. Which among the following is not an international economic institution ?

(1) IMF

(2) IBRD

(3) ADB

(4) IFRS

The International Financial Reporting Standards, usually called the IFRS Standards, are standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB) to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries.

50. Assertion (A) : The fall in aggregate expenditure or aggregate demand in the economy works to reduce imports and help in solving the balance of payment problems.

Reasoning (R) : The important way to reduce imports and thereby reduce deficit in balance of payments is to adopt monetary and fiscal policies that aims at reducing aggregate expenditure in the economy.

Code :

(1) (A) and (R) both are correct and (R) supports (A).

(2) (A) and (R) both are correct but (R) does not support (A).

(3) (A) is correct but (R) is incorrect.

(4) (R) is correct but (A) is incorrect.

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