ICSE Set Qa1 Year Icse Economic97 Qa1.php Economics Exam Paper for students online

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Economics - 1997 ( I.C.S.E)
You are on answers 1 to 3

Time allotted: (Two Hours)
Instructions:
- You will NOT be allowed to write during the first 15 minutes.
- This time given at the head of this paper is the time allowed for writing the answers.
- Attempt all questions from Section A and four question from Section B.
- The intended marks for questions or parts of questions are given. in brackets [ ].

SECTION - A

Q.1 (a) Give two characteristic features of land as a factor of production.
Ans.1 (a). Two characteristic features of land as a factor of production are :-
1. Supply of land is either inelastic or less than perfectly elastic.

2. Land is an immovable and passive factor of production. It is fertile and this fertility is indestructible. Land provides raw material used in the process of production though it is subject to the law of diminishing returns which means that over a fixed piece of land if the unit of labour and capital is increased, the subsequent units of labour and capital will yield diminishing returns.

Q.1 (b) Explain two factors on which the supply of labour depends.
Ans.1(b) The supply of labour depends on the following factors :-
1. Size and Growth of Population:- Supply of labour force in a country depend on the size and growth of the population of that country . Growth of population means the net difference between birth and death rate. If in a country, the birth rate is more than death rate, then the population grow faster and supply of labour force will increase faster.

2. General level of wages :- Supply of labour increases when wages are less and decreases when wages are more. It is so, because when wages are high, workers are induced to work for less hours and when wages are low, the workers work overtime and ask the members of their families to do some job in order to earn their livelihood.

Q.1 (c) Give two features of a Joint-Stock Company.
Ans.1(c) . Two main features of a joint stock company are :-
1. It is a voluntary organization :- A joint stock company is totally a voluntary association since it is formed by the people on their own and there is no compulsion by law of the government to form it.

2. Managed by Elected Representatives :- The company is managed by a Board of Directors. The members of the Board are elected by the share holders and these are well known in business and industrial circles.

Q.1 (d) What is meant by 'limited liability' ?
Ans.1(d) The term 'limited liability' is related to limited liability of the share holders of a joint stock company because a share holder is liable only to the face value of his shares. This factor induces all sort of people to purchase shares and helps industrial investment and growth.

Q.2(a) What is meant by an economic holding ?
Ans. 2 (a) Economic holdings are those holdings which are profitable for agriculturists to hold them. Normally these holdings are large sized holdings, where it is possible to make use of modern production techniques, tools and equipment . This provides higher total and average production due to modernisation and increased productivity . These holdings fetch huge returns to the owner of land.

Q.2(b) State two causes of food shortage in India.
Ans.2(b) Food problems arise only when the supply of food grains falls short of the demand for food gains. These reasons are discussed below :-

1.Defective food policy :- The problem arises due to the defective food policy of the Govt. Due to this defective policy, we have a problem of food shortages in India.

2. Wastage of Food grains :- According to an estimate 15% of food grains in India are destroyed by rats, locusts, insects etc, and 10 % of food grains are destroyed in godowns . Thus one fourth of total production of food grains gets wasted , resulting in shortage of food grains.

Q.2(c) Give two reasons for the introduction of a ceiling on land holdings.
Ans. 2(c). Ceiling on land holding is one of the important reforms suggested and tried in recent years . Under this method the maximum size of land holdings is fixed, the surplus land if any is taken away and is distributed among landless laborer, marginal farmers. The reasons for the introduction of a ceiling on land holdings are :-

1. Among all resources, land is most scarce and claimants for its possession are extremely numerous.

2. In the context of the current socio-economic climate, redistribution of land is imperative.

Q.2 (d) What is meant by 'Public' and 'Private' Sectors in industry ? Name any two industries in the 'Public' Sector.
Ans. 2(d). In public sector, we include the undertakings which are owned either by a govt. itself or a body set up by the Govt. to direct and control the undertakings in the public sector.

While private sector is a sector where enterprises are owned by private persons or individuals. The private sector generally works with the motivation of profit only. The service concept comes afterward .
Two industries in the public sector are :-
1. Steel plants in Bhilai, Durgapur,Rourkela,Bokaro, Jamshedpur, Bhadrawati, Kulte, Hirapur.

2. Bharat Heavy Electricals Limited and Heavy Electrical India Limited. Producing heavy electrical machinery.

Q.3(a) State two advantages of the consolidation of holdings.
Ans.3 (a) Consolidation of holdings mean allocation of compact plot of land in exchange for the several small plots held by the owner of the land . Advantages of the consolidation of holdings are :-
1. Consolidation facilitates cultivation.
2. The economies, because of large scale agriculture production can be achieved

Q.3(b) Give briefly any two sources of finance for large-scale industries.
Ans.3(b) Some institutions were set up by the Indian Government for the provision of finance to industries. Two of these institutions are :-

1. Industrial Finance Corporation of India (IFCI) :- To finance the large scale industries the govt. established IFCI. This corporation grants long term or medium term loans or manages for them or guarantees to large scale firm. The corporation also provides advice and guidance to the promoters of various manufacturing industries. From 1948 to March 1992, the corporation sanctioned net financial assistance of over Rs. 13963.3 crores and disbursed assistance amounting to Rs. 8650.6 crores.

2 Unit Trust of India :- To simulate and pool the savings of the middle and low income groups and to enable them to share the benefits of rapidly growing industrilisation in the country , Govt. of India established of unit trust of India in February, 1964 with an capital of Rs. 5 crores. The total investment of Unit Trust is divided into a number of units of equal face value which is Rs. 10.00 or Rs. 100.00 each.

Q.3(c) State two features of the industrial structure in India.
Ans.3(c). Indian economy was underdeveloped and background at the eve of the independence. Agriculture and industrial backwardness, chronic poverty, vast inequality of income, concentration of wealth, low income, low productivity were the important features. Five year plans were introduced for rapid development of agriculture and industries in India. The two main features of the industrial structure in India are,
1. Presence of public, private, cooperate and joint sectors.
2.Primary, secondary and tertiary occupations

Q.3(d) Give two reasons why railways should be protected against road transport.
Ans.3(d) Two reasons why railways should be protected against road transport are given below :-
1. The railways are best means of long distance travelling and the railways connect the metropolitan cities with each other.

2. The railways can easily transport heavy and spacious goods, such as minerals, iron and steel products, machines, military equipments like tanks etc from one peace to another.

Q.4(a) Give two important features of sole proprietorship.
Ans.4 (a) When a business unit is owned and managed by a single individual, its owner is known as the sole proprietor or sole leader or individual entrepreneur . Following are the two important features of 'sole proprietorship'.

1. Management and Control :- The separation of ownership and management which is common in big business is not present in this form of business organisation, since the owner himself manages the business.

2. Sharing of Profits :- The whole profit of business goes to the sole proprietor.

Q.4(b) Give two advantages of indirect taxes.
Ans.4(b) Indirect taxes are those which are "Changes on occasional and particular events" The following are the two advantages of indirect taxes :-
1. Convenience :- The indirect taxes are less inconvenient than direct taxes. These are paid in small installments instead of lump-sum,

2. Elastic :- Indirect lanes are highly elastic in nature as the revenue from the taxes can be increased when desired.

Q.4 (c) State any two objectives of planning in India .
Ans.4(c) The following are the two objectives of economic planning in India :-
(1) Economic Objectives :- These include the following :-
(i) Economic security.
(ii) Development of backward areas by industrialisation.
(iii) Post war reconstruction.

(2) Political Objectives :- These include the following :-
(i) Peace
(ii) Defence
(iii) Offence.

Q.4 (d) Briefly explain any two functions of the Reserve Bank of India.
Ans. 4(d) The Reserve Bank of India which is the Central Bank of our country was set up in 1935 under the Reserve Bank of India Act of 1934. It was a share holders' bank in the beginning with a share capital of Rs. 5 crores divided into 5 lakh shares of 100 each. The Reserve Bank was nationalized in the year 1949 and its entire share capital was acquired by the Government of India at Rs. 118.62 per share of Rs. 100 . The reserve Bank of India performs all the functions of Central Bank in the country. Two of these functions are as follow :-

1. It collets and disseminates monetary and financial information through publications. It also publishes reports on currency, finance, banking, cooperative movement etc. regularly.

2. It acts as the bankers bank and also as the lender of the last resort.

SECTION - B

Q 5 (a) Discuss the factors on which capital formation in a country depends.
Ans: 5(a) Capital formation is a process of producing and increasing of more capital goods such as machinery, raw materials, equipments etc.

(A) Savings:-
Capital formation is basically the result of savings. Saving is further dependent on willingness and power to save.

(i) Will to Save :- Savings occur only when people have desire to save. Higher the intensity of desire to save, higher the savings.
(ii) Power to Save:- People can save only when they have enough income after fulfilling their basic needs. This power to save depends on national income of country and its distribution.
(iii) Facilities to Save :- More the facility to save, the more will be savings. These facilities include banking services and other investment opportunities.
(B) Effective mobilization of Savings :- Saving should be invested in proper channels. Capital formation takes place only when there is effective mobilization of savings. Banks , insurance companies, stock exchange markets and investment trusts etc, can effectively mobilize these savings. They collects savings of household and provide it to industrialist.
(C) Investment of Savings :- Capital formation takes place when these savings are to be invested in capital goods and other productive activities. If entrepreneurs are not ready to take risk, capital formation will never takes place.
Thus these above mentioned factors play an important role in capital formation.

Q 5 (b) Explain four differences between 'a share' and 'a debenture'.
Ans.5(b)
" A share is the interest of the share holder in the company measured by a sum of money for the purpose of liability and of interest "
                                   ----------------- Justice Farewell
" Debentures includes debenture stock, bonds or any other securities of a company, whether consisting a charge on the asset of the company or not."
                                   ------------------ Companies Act

Shares	Debentures
1) It is a part of equity.	1) It is a part of debt.
2) A share holder receives dividend.	2) A debenture holder receives interest.
3) Except redeemable preference shares, shares can not be redeemed during the life of company.	3) Debentures must be redeemed on maturity.
4) In case of winding up, payment of share capital is made after the payment of debentures.	4) Payment of debentures is made before the payment of share capital.
5) Share confers on its holder the right to participate in and vote at company's meetings.	5) A holder of debenture neither possess any voting right in company's meeting nor can be participate in meetings unless very extra ordinary situations.

Q 6.(a) Describe four features of a cooperative organization.
Ans.6(a) As per Mac lagan committee on cooperation ,"the theory of cooperation implies that an isolated and powerless man can, by association with others and by moral development mutual sport obtain in his own degree the material advantages available to the wealthy and powerful person."
Four main characteristics features are given bellows:
(1) Limited Returns on Capital ---- In a cooperative, the economic interest of all the members are the main consideration. Since capital application is not the main motto of cooperative, the rate of interest payable on capital contributed by the members, it is normally restricted to 5 or 6% under the cooperative societies act.

(2) Voluntary Association ------ In a cooperative organization, there is no compulsion either to becomes its members or continue its membership. Thus it is voluntary association.

(3) Mutual Help and Welfare ---- Each for all and all for each, is the famous slogan of cooperatives. Thus cooperative form of the organization is based on mutual help and welfare.

(4) Distributive Justice ---------- In a cooperative organization, the profits are distributed equitably among all its members to the extent of business transacted with it by the respective members.

Q 6.(b) Briefly describe the four advantages of public enterprises.

Ans 6(b) When an industry or a business run, owned and managed. entirely or exclusively by the state, it is called state undertaking or public enterprise. Basic industries like iron & steel, chemicals, fertilizer, atomic power and heavy machinery and the services like railway, post & telegraph etc are public enterprise. These public enterprise are gaining importance because of the following advantages.

(1.) Public Utilities and Social Services ------ The enterprise utilities and services ---- the provision of electricity, transport services, post & telegraph, telephone facilities, railways etc are only organized by the govt. in the form of public enterprises.

(2.) Optimum Allocation of Resources -------- Public enterprise make optimum allocation of the country's resources while undertaking any productive work since they are guided by welfare of society rather than profit making.

(3.) Public Welfare as Motive ------------------ The main motive of public enterprise is public welfare and the profit are only sought in order to find resources for future development.

(4.) Development of Basic Industries---------- It is beyond the power of private companies to start and develop basic industries like iron & steel, Heavy electrical, heavy engineering etc. which are essential to produce a base for industrial development of a country, since it needs huge capital and advanced technical knowledge.

Q7. (a) Discuss the importance of agriculture in Indian economy.
Ans. 7(a) Agriculture plays an important role in the economic life of India. which can be explained as below : -
(1) Share of Agriculture in National Income : -The share of agriculture and it subsidiary industries like forestry, animal husbandry etc. in the national income of India is large. This share is about 1/3 of national Income.

(2) Importance of Agriculture Products in Consumption:- India spent a large part of her income on fulfillment of their basic requirement. Agriculture product form a major part of their consumption.



(3) Agriculture Supplies Food and Fodder : -Agriculture supplies food to India. As food is basic need of every person, fodder is required for live stock. These live stock are asset of a country and agriculture helps in keeping them alive.

(4) Largest Employment Providing Sector:- Unemployment is sever problem in India. Agriculture is mainly labor intensive Thus, it provides employment to a large number of people. It is also a source of self employment. It is rightly said," Agriculture provides work to free hands, food to serving people and source of income to poor people."

(5) State Revenue :- The revenue of govt. depends largely on agriculture. The govt. gets directly revenue from the agriculture. The transportation of food grain from one part of the country to other part by railway also brings revenue in the coffers of govt.

(6) Importance of Agriculture for Industrial Development :- Agriculture provides raw material for vanaspati, jute, cotton, textiles, sugar industries. It also provides market for industrial products.

Thus we can say that agriculture plays an important role in India.

Q.7 (b) Give four measure which will help to solve food problem in India.
Ans. 7(b). Food problem arises only when the supply of food grain falls short of demand for food grains. India is facing food problem since its separation from Burma.
Corrective Measures : - The following measures can be adopted to solve this problem.
(1) Crop Insurance :-    This insurance reduces the risk of the farmers and save farmers form economic loss. It will motivate farmers to produce more.
(2)Increase in Production:-Certain steps are required to increase the production such as - fixation of economic holdings, extension of means of irrigation, consolidation of holding, cooperative farming, use of improved seeds, credit facilities to farmers etc.
(3) Fixation of Prices of Food Grain : - Fixation of minimum prices of food grain minimizes the risk of farmers and encourage them to increase the production.
(4) Control on Over Population :- Govt. of India should vigorously launch programme of family planning to control on overpopulation. Government should create awareness among people that large family is main hurdle in their revival from poverty.


(5) Change in Habits of Consumer:- Government should induce people to make a greater use of vegetables, eggs and fruit and less of food grain. It will reduce burden on agriculture.
(6) Proper Distribution System : - Government should take the whole sale trading of food in its own hands. The state trading should be associated with co-operative consumer societies, warehousing and fair price shops.

Q8 (a) What important steps have been taken by the government to promote large-scale industries?
Ans. 8(a) The government has taken the following steps to promote the growth of large scale industries : -
(1) Setting up of the institution which provides finance for the growth of industries such as Industrial Financial Corporation of India (I F C I ), Industrial Credit and Investment Corporation of India, National Small Industries Corporation, Unit Trust of India, Industrial Development Bank of India etc.
(2) Setting up of the other institution for the promotion of industries in India:- The government has set up the many institution to promote industries in India such as Industrial Bureau of Mines (IBM) , National Industries Development Corporation (N I D C), Indian Standard Institute (ISI), National Mineral Development Corporation Limited (N M D C), Hindustan Organic Chemicals Limited, Hindustan Insecticides Limited New Delhi, Indian Petrochemicals Corporation, Hindustan Copper Limited, The National Instrument , The Tea Board, The National Fertilizers, Coffee Board etc.

Q8 (b) Give four suggestion to solve the problems of cottage and small-scale industries.
Ans.8(b) The following four steps may be taken to solve the problem of the small scale and cottage industries :-
(1) To avoid competition from the large scale industries :- The small scale industries can not compete with the large scale industries, therefore the commodities produced by the small scale industries should be reserved for them exclusively and these commodities should not allowed to be produced by the big industries .
(2) To provide sufficient finance :- The small scale and cottage industries face lot of hardships in getting finance. These industries do not have sufficient funds of their own, therefore, the banks and states finance corporation should finance the small scale industries without the demanding securities against their loans.
(3) Sufficient power supply:-The small scale and cottage industries face the problem of power which is major source of energy. Some of the small scale units do not get power at all, therefore the arrangement should be made to ensure power supply to these industries regularly.
(4) Marketing facilities :-These units face problems of marketing because these units do not have a set of sale of their own. The government should insure that goods and services produced by these industries should be sold in the market. The government store purchases should exclusively be reserved for these industries.

Q9 (a) What is the importance of irrigation in our economic life?
Ans. 9(a) Irrigation is the life line for agricultural production, without irrigation the production is impossible in agriculture. In areas where the rain fall is scanty and uncertain the artificial irrigation is absolutely necessary for agriculture. In modern economies the multicropping has become essential and for multicropping , the irrigation facilities are must. The cash crops as well as food grains output can not be increased if irrigation facilities are not available. After the green revolution the high yielding varieties of seeds need full irrigation because the required quantity of fertilizers, insecticides etc. can not be applied if the irrigation facilities are scanty. For the stable production as well as the double , triple cropping continuous supply of the water for agriculture is a precondition. The government should insure the maximum supply of water to agriculture from the available potential of water in country.

Q 9(b) Explain any four advantages of road transport in India.
Ans. 9(b) The following are the advantages of the road transportation :-
(1) The road transportation is best suited for the short distances travelling.
(2) The road ways are the best means of connecting the small cities , town and villages.
(3) The road ways are less costly in construction in hilly areas as well as plain areas.
(4) The road transport is helpful in transporting the perishable products, like fruits, vegetables, milk and breakable commodities like glasses china clay etc.

Q10 (a) Briefly explain the objectives of fiscal policy.
Ans:10 (a) Fiscal policy is the policy of Govt. regarding taxation, public expenditure and public debts.
Definition:-" A policy under which the Govt. uses its expenditure and revenue programmes to produce desirable effects and avoid undesirable effects on national income production and employment."
------------- A. Smithies.
Objectives:-
(1) Equity:-
By equity in distribution of income we do not mean absolute equity in income but reduction in gross inequalities of income.
(2) Mobilisation of resources :-The foremost aim of fiscal policy in underdeveloped countries is to be mobilize resources in private and public sectors.
(3) Accelerated rate of growth:-Fiscal policy promotes to accelerate the rate of economic growth by raising the rate of investment in public as well as in private sector. Balanced development of agriculture and industries is required to accelerate rate of growth.
(4)Encourage socially optimal investment :-Optimal investment is that which promotes economic development and avoids unproductive investment. Fiscal policy encourages investment into those productive channels which are considered socially and economically desirable.
(5) Induce capital formation :-Fiscal policy aims at inducement to investment and capital formation, by making investment in social and economic over heads.
(6) Check inflationary tendencies :- In a developing economy a mild inflation is unavoidable and desirable to stimulate production but galloping inflation disturbs the economy. With additional injection of purchasing power, the demand rises but supply remains inelastic on accounts of its structural rigidities, market imperfection and other bottlenecks, which is turn leads to inflationary pressures on the economy.

Q10 (b) Describe any four purposes of taxation.

Ans.10(b) Taxation is the biggest source of public revenue of Govt. It is legal duty of every citizen of a country to pay tax honestly.
Definition:-
" Tax is a compulsory payment from a person to the Govt. to defray the expenses incurred in the common interests of all without reference to special benefits conferred."
------------------- Saligman
Purposes :-

(1)Raising revenue :-Govt. needs funds for promotional and development activities. Govt. levies taxes of different types so that its revenue may increase.
(2)Regulation :-The aim of Govt. is to regulate consumption, production and other economic activities with the help of taxation.
(3) Equal distribution:-Taxation policy aims at equal distribution of national income. Taxes collected from rich are spent on the welfare of poor people through social services.
(4) Productivity:-The another aim of taxation policy is to improve a few productive taxes rather than to go for a large number of unproductive taxes.

Q11 (a) What is economic planning? Distinguish between the need , objectives and strategies of economic planning.
Ans:11-(a) "Economic planning is essentially a way of organising and utilising resources to maximum advantage in terms of defined social ends". Ist five year plan.

In this sense planning implies actions in the light of a definite predetermined objectives with the help of centralised control and deliberate utilisation of national resources.

(1) Need:- Need for economic planning is the answer to the question -"why economic planning is required ?" Economic planning is required due to existence of many economic factors mentioned as below:-
* Requirement of future generation
* Failure of market mechanism
* Economies of scale
* Mobilisation and allocation of resources
* Structural changes
* Requirement of foreign aid

(2) Objectives:- Objectives are the goals which economic planning aims to achieve such as:-

* Economic development
* Reduce economic inequality
* Increase in standard of living
* Comprehensive development
* Regional development
* Economic stability
* Social justice
* Self sufficiency
* Increase in employment
* Increase in investment and savings

(3) Strategies:-Strategies are the techniques adopted to achieve the objectives of economic planning . Some of the strategies followed in India can be mentioned as below:-

* More importance to public sector
* Growth of saving and investment
* Unbalanced growth of sectors
* Employment oriented
* Balanced regional development
* Progress of backward classes
* Social welfare
* Education etc.

Q11(b) Give four of the main objectives of the Eighth Five Year Plan.
Ans.11(b) Eighth five year plan was started from 1 april,1992. From the point of view of Sh. Paranav Mukherjee, this plan is of directive nature where human development is pivot of all development efforts:

Objectives:-
(1) Full Employment:- The main objectives of this plan ,was to generate full employment by the end of 20th century.

(2) Control of population:-It also aims at control population growth with the help of active contribution of public and incentives .

(3) Elimination of illiteracy:-Universalisation of primary education and abolition of illiteracy between the age group 15-35.is also an objective of this plan.

(4) Provision of health services:-The another objective of eighth plan is to make proper arrangement for clean drinking water for all people residing anywhere in India ,specially in villages , making arrangements for first aid and disposal of waste.

(5) Growth and diversification of agriculture:-This plan gave emphasis on agricultural development and diversification to achieve self sufficiency and increase the exports of food products.

(6) Strengthening of infrastructure:-For the continuous development of economy ,eighth plan laid emphasis on strengthening the infrastructure such as transportation ,irrigation ,electricity etc.