QUESTION SET-8 (CBSE COMMERCE NET )

QUESTION SET-8 (CBSE COMMERCE NET )

46. SDRs are popularly known as

A.currency notes

B.paper gold

C.silver coin

D.gold coin

ANSWER:-B

EXPLANATION:-SDR are called special drawing rights its introduced by IMF for increasing international liquidity.It is popularly known as paper gold also. SDR was introduced in 1969 with the objective of overcoming the problem of international liquidity. Under this ,each country is allotted quotas which can be exchanged for currency for making international payments .Liquidity means to be able to make payment easily. In international scenario it means making payment for its imports.When a country faces liquidity problem that  means unable to make payment for its import than its balance of payments becomes unfavorable .In such a situation SDR can be used for meeting such deficits.

47.which one is not international institution?

A.IMF

B.IDA

C. IBRD

D. TRAI

ANSWER:-D

EXPLANATION:-Except option D all are international organisation. TRAI stands for telecom regulatory authority of India. It is the regulator of the telecommunication business in India. IMF is international monetary fund and IDA is international development authority. IBRD stands for international bank for reconstruction and development.These three are international financial institution.

48.India is not associated with:

A. SAARC

B. NAFTA

C. BRICS

D.None of the above

ANSWER:-B

EXPLANATION:-INDIA is a member of South Asian Association of Regional Cooperation (SAARC) and BRICS (Brazil, Russia,India ,China and South Africa) .India is not a member of NAFTA (north american free trade agreement) .Its member are Canada, Mexico and United States. Its came into existence on January 1, 1994.

49.The comparative cost advantage theory was given by:

A.David Ricardo

B.Adam smith

C.Raymond Vernon

D.Micheal E Porter

Answer:-A

EXPLANATION:-David Ricardo is the author of book "Principles of political Economy and Taxation" and principle of comparative advantage is developed by David Ricardo in this book. In this book he explained that in trade each country gains weather they have any absolute advantage or not.As long as price ratio differ between countries every country will have a comparative advantage.That means producing a good at lower relative cost disadvantage than other goods. It should export export these goods in exchange for those goods which have a relatively higher cost disadvantage.In summary both country can benefit by exporting good in which it has cost advantage.

50.The components of W.T.O are:-

A.Ministerial conference

B.Dispute settlement body

C.Director General

D.all of the above

ANSWER:-D

EXPLANATION:-WTO is dominated by its highest authority ,that is  the Ministerial Conference, which consist of all WTO members, and they are required to meet every 2 year to meet and discuss matter related to multilateral trade agreement. General council does day to day work of WTO and and the member of WTO .General council is required to report to Ministerial conference. General council is further delegates its work to two bodies.These are dispute settlement body and Trade Policy review body.Dispute settlement body oversee the work related to dispute settlement procedure and trade review policy body conducts regular reviews of trade policy of individual WTO members.

51.The companies globalize their operation through different means:-

A.exporting directly

B.Licensing/ franchising

C.joint venture

D.all of the above

ANSWER:-D

EXPLANATION:-In terms of business globalization means " the integration of national economics into the international economy through trade , foreign direct investment , capital flows, migration and the spread of technology." Exporting directly is included in globalization as it helps in exporting goods to other country and it brings foreign exchange and improves balance of payment. Licensing/ franchising is a contractual agreement whereby franchiser grant license to franchisee to use its successful business model and brand and retains control in itself. example of franchising are McDonald, SUBWAY etc on the other hand joint venture is an agreement between two parties who pool their resources and agreed to share profit  for the purpose of attaining their common objective. Example are PETRONET LNG LIMITED.

52.Which one of the following is a true statement?

A.A balance of trade deals with export and import of invisible items only.

B.A balance of payment deals with both visible and invisible items.

C.The current account is not a component of balance of payment

D.All of the above

ANSWER:-B

EXPLANATION:- The balance of payments is a consolidated account of the receipts and payments from and to other countries arising out of all economic transaction. The balance of payment comprises summary of the account that is current account and capital account and  official reserve Account. Current Account comprises of :-1) merchandise trade ( visible import and export) 2) Invisible trade ( invisible import and export)3)other flows (investment income and unilateral transaction). Capital account on the other hand comprise :-1) long term capital transaction 2) short term capital transaction. Official reserve account consists gold,  SDR , convertible foreign exchange. .

53.Sales of the firm are ₹ 74 lakhs. Variable costs, ₹ 40 lakhs fixed cost ,₹  8 lakhs . Operating leverage of the firm will be:
A. 1.48
B. 1.78
C.1.31
D.2.42

ANSWER:-C

EXPLANATION:- OPERATING LEVERAGE=CONTRIBUTION / EBIT
Sales-variable cost=contribution⇒₹ 74 lakhs-₹ 40 lakhs= ₹34 Lakhs
contribution-fixed cost=EBIT⇒₹34 Lakhs-₹ 8 lakhs=₹ 26 lakhs
operating leverage=₹34 Lakhs / ₹ 26 lakhs=1.31

54.Minimum Alternate Tax (MAT) under sec 115 JB of the Income Tax Act is applicable on:-

A. partnership firms

B.Association of persons

C.certain companies

D.all types of companies

ANSWER:-C

EXPLANATION:-MAT ( Minimum Alternate Tax ) is a tax payable under income Tax Act. The concept of MAT was introduced to target those companies that make huge profits and pay dividend to their shareholders but pay no or minimal tax by taking advantage of various deductions and exemptions allowed under Income Tax Act. But with the introduction of MAT, the companies have to pay a fixed  percentage of their profits as Minimum alternate tax. MAT is applicable to all the companies including foreign companies also. MAT is calculated under section 115 JB of Income Tax Act. Every company has two pay higher of the following tax calculated as per the following provision.
1.)Tax liability as per Normal Provision of income tax Act ( tax rate 30% plus 3% education cess plus surcharge if applicable).  or
2.)Tax liability as per MAT provision under section 115 JB of Income Tax Act (18.5% of book profit plus 3% education cess plus surcharge if applicable.) Hence above shows that MAT is applicable to certain company who satisfy the above condition.

55.The Securities and Exchange Board of India was not entrusted with the function of

A.investor protection

B.ensuring fair practice by companies

C.promotion of efficient services by brokers

D.improving the earning of equity shareholders

ANSWER:-D

EXPLANATION:-SEBI popularly known as securities and exchange board of India was establish in the year 1988 but came into force in 1992 when Securities and exchange board of India Act 1992 was notified. The main function of SEBI is to- 1)protect the interest of investor and to keep a check on malpractice adopted by companies. 2) promote the development of securities market. 3) Regulating the functions of its intermediaries like stock broker ,sub-brocker, share transfer agent, merchant banker etc.