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Blast from the Past 5 MCQ Series

UGC Net Commerce Examination

Business Environment

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Question 1

The central bank can significantly influence the savings, investmentsand consumer spending in the economy through which of the followingpolicy ?

(1) Fiscal Policy

(2) Monetary Policy

(3) Industrial Policy

(4) Foreign Exchange Policy

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Fiscal Policy vs. Monetary Policy

• Fiscal policy involveschanging government spending andtaxation. It involves a shift in thegovernments budget position. e.g.Expansionary fiscal policy involves taxcuts, higher government spendingand a bigger budget deficit.

• Monetary policy talks about themovement and supply of money. It ishandled by the central bank of thecountry by changing factors likeinterest rates, cash reserve ratio etc.

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Policy

Monetary Policy in India

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FormulationIn India, the policy interest rate required to achieve the inflation target is decided by the Monetary Policy Committee (MPC) which is chaired by RBI

Governor.

ObjectiveThe primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. To maintain price stability, inflation

needs to be controlled.

Solution

The central bank can significantly influence the savings, investmentsand consumer spending in the economy through which of the followingpolicy ?

(1) Fiscal Policy

(2) Monetary Policy

(3) Industrial Policy

(4) Foreign Exchange Policy

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Question 2

Which one of the following is not the characteristic of capitalism ?

(1) Individuals and associations behave with economic motive ofmaximising their profit with least sacrifice or cost.

(2) The country’s major means of production are either owned by theGovernment or their use is controlled by the Government.

(3) Producers, consumers and employees compete among themselves,as the resources and opportunities are limited.

(4) Price, the invisible hand, plays a predominant role in the flow of thefactors of production and consumption.

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Capitalism vs. Socialism

• The main difference between capitalismand socialism is the extent ofgovernment intervention in theeconomy.

• A capitalist economic system ischaracterised by private ownership ofassets and business.

• A socialist economic system ischaracterised by greater governmentintervention to re-allocate resources ina more egalitarian way.

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Capitalism

• Under a capitalist economy, the economy runs through individualswho own and operate private companies.

• A capitalist economy relies on free-markets to determine, price,incomes, wealth and distribution of goods.

• Decisions over the use of resources are made by the individual orindividuals who own the company.

• Under capitalism, it is the government's job by enforcing laws andregulations to make sure there is a level playing field for privately-run companies.

• A capitalist system is also called a free market economy or freeenterprise.

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Solution

Which one of the following is not the characteristic of capitalism ?

(1) Individuals and associations behave with economic motive ofmaximising their profit with least sacrifice or cost.

(2) The country’s major means of production are either owned by theGovernment or their use is controlled by the Government.

(3) Producers, consumers and employees compete among themselves,as the resources and opportunities are limited.

(4) Price, the invisible hand, plays a predominant role in the flow of thefactors of production and consumption.

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Question 3

Q. Which of the following is not the salient feature of the industrialpolicy developments since 1991 ?

(1) The scope of the private sector has been enormously expanded.

(2) Public sector has been withdrawing partially or fully from several ofthe enterprises by divestment.

(3) The Indian industry is increasingly exposed to foreign competition.

(4) Monopoly or dominant position for the public sector in most of theindustries and control of the commanding heights of the economy bythe public sector.

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New Industrial Policy 1991

New Industrial Policy of 1991 has brought comprehensive changes ineconomic regulation in the country. The policy has brought changes inthe following aspects of industrial regulation:

1. Industrial delicensing

2. Deregulation of the industrial sector

3. Public sector policy (dereservation and reform of PSEs)

4. Abolition of MRTP Act

5. Foreign investment policy and foreign technology policy

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Impacts of Policy

• This policy made License, Permit and Quota Raj a thing of past.

• The role of public sector is now limited.

• The process of disinvestment in PSUs also started.

• The policy provided easier entry of multinational companies andprivate corporations.

• This brought domestic as well as foreign investment in almost everysector opened to private sector.

• All this resulted in increased competition, that led to lower prices inmany goods.

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Solution

Q. Which of the following is not the salient feature of the industrialpolicy developments since 1991 ?

(1) The scope of the private sector has been enormously expanded.

(2) Public sector has been withdrawing partially or fully from several ofthe enterprises by divestment.

(3) The Indian industry is increasingly exposed to foreign competition.

(4) Monopoly or dominant position for the public sector in most of theindustries and control of the commanding heights of the economy bythe public sector.

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Question 4

Q. Which of the following does not form the part of the importantinformation to be incorporated in the Memorandum of Association asspecified in the Companies Act, 2013 ?

(1) The name of the company and the state in which it is situated.

(2) The objects for which the company is proposed to be incorporated.

(3) The rules, regulations and bye-laws for the internal management ofthe company.

(4) The liability of the members of the company, whether limited orunlimited.

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Legal Environment – Companies Act

New Company Act, 2013 replaced the Companies Act, 1956 by revisingthe law as per the requirements of the international best practices aswell in keeping with the needs of the current economic environment inthe country.

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Important Documents

Memorandum of Association

Articles of Association

MOA vs. AOA

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Solution

Q. Which of the following does not form the part of the importantinformation to be incorporated in the Memorandum of Association asspecified in the Companies Act, 2013 ?

(1) The name of the company and the state in which it is situated.

(2) The objects for which the company is proposed to be incorporated.

(3) The rules, regulations and bye-laws for the internal management ofthe company.

(4) The liability of the members of the company, whether limited orunlimited.

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Question 5

Which of the following statements is not correct relating toconsumerism ?

(1) Consumerism is a manifestation of the failure of the business toguarantee and ensure consumer legitimate rights.

(2) The government does not have any role in consumer protection as itis the part of business organisations alone.

(3) The consumers should accept consumerism as a means of assertingand enjoying their rights.

(4) Consumerism evolution is not a set-back for marketing but ratherpoints to the next stage in the evolution of enlightened marketing.

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Consumerism

Consumerism is a social force within the environment designed to aidand protect the consumers by exerting legal, moral and economicpressure on business.

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Need for consumerism – To safeguard consumers from

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Dangerous and inferior merchandise

Adulteration

False or misleading advertisements

Denied after sale service

Unfair trade practices Duplicate or sub-standard goods

Monopolistic and restrictive trade

Exploitation of consumers by businessmen.

Consumer Protection – Whose Responsibility ?

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Government Voluntary Organisations

Consumer Protection Act, 1986

Question 5

Which of the following statements is not correct relating toconsumerism ?

(1) Consumerism is a manifestation of the failure of the business toguarantee and ensure consumer legitimate rights.

(2) The government does not have any role in consumer protection as itis the part of business organisations alone.

(3) The consumers should accept consumerism as a means of assertingand enjoying their rights.

(4) Consumerism evolution is not a set-back for marketing but ratherpoints to the next stage in the evolution of enlightened marketing.

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The End

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5 Past MCQ Series – UGC Net Commerce

UGC – NET Commerce

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