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# ICSE Set Qa1 Year Icse Economic99 Qa1.php Economics Exam Paper for students online

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Q 7 (a) Describe the quantitative method of credit control  adopted by the central bank to control credit.
Ans. 7
(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.

Q 7 (b) What are the  co-operative societies? Explain the three different ways in which is co-operative are organized  in  India.
Ans. 7 (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.

Q 8 (a) How is a Joint Stock Company formed ? In what four respects does a Joint Stock Company differ from a Partnership?
Ans. 8
(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

Q 8  (b) Discuss two objectives of land reform and give a brief account of tenancy reforms in India.
Ans. 8 (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.

(1) Regulation of Rent :- Rent has been fixed at 1/6 of gross produce by the states of  Rajasthan , Gujrat and Maharashtra , at 1/4 of G.P in Bihar , between  1/4 and 1/6 of gross product in Kerala etc.

(2) Security of Tenure :-  The legislation provided that tenants can't be ejected so long as they continue paying the rent.  Maximum limit is fixed for self cultivation for land owners.

(3) Conferment of ownership rights to tenant:- Some states have given to the tenants the right to purchase their holdings to encourage the cultivators to work hard.

Q 9 (a) What is meant by subdivision and fragmentation of holdings ? Describe any four causes for the subdivision and fragmentation of land holdings .
Ans 9(a)
The term  sub-division and fragmentation means, The land holdings are divided into small pieces of agriculture lands scattered at many places" . It increases the cost of the management of agriculture and makes the occupation of agriculture uneconomical .
The following causes are responsible for the sub-divisional and fragmentation of land holdings :-

1) Law of Inheritance:-   According to Hindu code bill and Muslim personal law , The land of the father is distributed among the children equally. The process  goes on  resulting in sub-divisional and fragmentation of land holdings.

2) Pressure of Population:-  With the increase of population and due to the  lack of earning livelihood by the means other  than land, puts pressure on land . Every one demands his share resulting in subdivision and fragmentation of land holdings.

3) Decline of Joint family:-  Every member wants to live separately with his family , so the land is divided into smaller pieces.  This happens due to the downfall of the joint family system.

4) Rural  Indebtedness:-  Land is mortgaged to the money-lenders against loan borrowed .  In absence of repayment of loan , the land is taken away by the money lenders .

Q 9 (b) Examine any four reasons for the importance of good transport in a growing in economy like that of India .

Ans. 9(b) The good transport system  is important for the growing  economies like India , due to the following  four main reasons :-

1. Movement of raw material, fuels and machinery :-With the help of efficient and cheap transportation system, raw material, fuels and machinery etc. can be easily carried to  the place of producing units, where these are needed.

2. Increase in the mobility of labour :- A good  transport system helps in the mobility of labour . The underemployed and unemployed labour can get full employment.

3. Helps in national integration and human knowledge :- The good transport system helps in national integration and human knowledge because people can easily exchange their  views by going from one place to another place.

4. More access to natural resources :- Development of the means of transportation will make it easy  to have a access to the remote places having stock of natural resources. It will help the nation to grow at a faster pace.

 Q 10 (a) What is Economic Planning ? Explain the reasons for the three Annual Plans of 1966-'68, 1968-'69. Ans. 10 (a) The planning is the process by which pre-determined goals are achieved by allocating the available resources within a specific period of time.  Therefore in planning  the following three points are emphasized .   The economic goals are determined.  Resources are allocated to achieve these goals in  a given period of time .   Distribution  Definition :- "A scheme of economic organization  in which individual  and separate units, enterprises and industries are treated as coordinated units of one single system for the purpose of utilizing available resources to achieve the maximum satisfaction of the people's  need within a given time." Prof Lewis  Reasons for plan holiday:- The three annual plans were implemented after the failure of the 3rd five year plan from 1966-67, 1967-68 and 1968-69. The  main reasons of this plan holidays are the following :- 1. Failure of IIIrd Five Year Plan :- The IIIrd five year plan failed badly to achieve its pre-determined targets . 2. Failure of monsoon in the year 1965-66 :- Due to poor monsoon,  the production in agriculture sector fell down considerably which resulted in  inflation in the economy. 3. Foreign exchange crisis :- The country faced the foreign exchange crisis and due to this , the devaluation of  Indian rupee took place in the year 1966. Due to the above mentioned reasons,  the govt .could not implement the fourth five year plan in time and instead  of that it introduced three annual plans. Q 10 (b) Discuss any four functions of the Government in economic development. Ans. 10 (b) The four functions of the govt. in economic development are given below :- I Reduction in the Inequalities of Income and Wealth :- In most of the economies the distribution of income and  wealth is unequal. It is not a desired goals  from the point of view of the economies of welfare. It is true that the perfect  equality of income and wealth is not possible . The welfare govt. in the modern economies always try to achieve the goal of equal distribution of income and wealth through the various measures like taxation on higher income, public distribution in favour of poors. etc. 2. Full employment :- The full employment is that situation in the economy when the involuntary unemployment is reduced to zero or to a  minimum possible level. The govt. tries to provide employment to all the working population in the economy. For the achievement of this goal the govt. tries to increase the rate of capital formation which always results in production oriented employment in the economy. 3. Improvement in the standard of living :- The main objective of the economic development is welfare of the society. One of the criteria for measurement of the welfare and economic growth is the improvement in the  standard of living of the people for this the real per capital income should go up in the society. 4. Social security :- People in developing countries have low income and feel insecure due to this reason. In case of unemployment ,sickness or accident, they feel much insecure. In case of the death of the earning hand in the family, family members feel more insecure. The reasons given above forced the govt to come forward . The govt should follow the method of social insurance schemes to improve social security in the country specially for lower income people. Q 11 (a)  Discuss any four reasons to show that rapid industrialisation of our country is essential. Ans.11(a)  Predominantly Indian economy is an agricultural economy therefore the rapid industrialization is must for the economy due to the following reasons:- 1. To Increase the National Income :- The industrialization  can provide a continuous and secure basis for the rapid growth of income. Man by putting  in more efforts can increase production and hence income. 2. To Increase the Employment Opportunity :- In India too much population  depends on agriculture . The agriculture sector is marked by the seasonal and disguised unemployment . The rapid industrialization can provide the employment to the surplus labour from agriculture sector. 3. Increase the Capital Formation :- Due to increase in the industrialization, the employment will increase , which resulted in the increase in the income and saving . Increased  saving  will lead to increase in capital formation which will further lead to faster economic growth. 4. Balanced Economy :- The increased industrialization will  reduce the dependence  on  agriculture. As a result there will be balanced growth of all the sectors in the economy.   Q 11 (b) What is fiscal policy ? How can fiscal policy be used for economic development . Ans. 11 (b). The fiscal policy is the budgetary or taxation policy which influences the public expenditure and public revenue in the economy ,through taxation , public loan and  means of financing, the deficit  budget and minting  of new currency notes. It is used as a weapon to stabilize the economy in the face of inflation or deflation. The fiscal policy can help economic development in the following way :- 1. It increases the aggregate savings in the  economy by applying the cuts in the private and public consumption. Increase in saving increases capital formation. 2. It helps in directing  the resources from less productive use to more  productive uses and from socially less desirable uses to more desirable uses. 3. The fiscal policy helps the economies by safe-guarding it against inflation. 4. The fiscal policy eliminates the sectoral imbalances arising in the economy from time to time. 5. It helps in reducing the glaring economic inequalities by bringing about an equitable distribution of income and wealth.