Gujarat Board GSEB Class 12 Organization of Commerce and Management Important Questions Chapter 12 Business Environment Important Questions and Answers.

GSEB Class 12 Organization of Commerce and Management Important Questions Chapter 12 Business Environment

Short Answer Type Questions

Question 1.
Define business environment.
Answer:
The environment created by the group of factors such as economic, social, legal, political, etc. that directly or indirectly affect the business is called business environment.

Question 2.
What is the advantage of early entry on business environment?
Answer:
By entering the market early, the producer may update products well before his competitors, and earn high profit.

Question 3.
What does sensitivity of management means with respect to business environment?
Answer:
Sensitivity of management means that in today’s time the management has become quite sensitive towards the changes that take place in the business environment. This helps them to retain profits.

Question 4.
What opportunity lies today against increasing fuel prices?
Answer:
Producing vehicles that run on alternate energy such as electrical or solar.

Question 5.
Why large business houses continuously study business environment?
Answer:
The business environment has become quite dynamic. Every now and then there are new changes that come up in the market. Hence,….

Question 6.
State few external factors that affect business environment.
Answer:
(a) Economic systems,
(b) Degree of economic development,
(c) National and per capita income,
(d) Distribution of national income, etc.

Question 7.
Define internal factors affecting business environment.
Answer:
The factors which can mostly be controlled by the managerial personnel of the organization are called internal factors of business environment.

Question 8.
Define external factors affecting business environment.
Answer:
The factors which cannot be controlled by the managerial personnel of the organization are called external factors of business environment.

Question 9.
What are economic factors?
Answer:
Economic factors are the fundamental data about the market and economy taken into consideration when an investment or business value is calculated.

Question 10.
What is economic system?
Answer:
The organized way in which a country allocates resources and distributes goods and services is known as the economic system of that nation.

Question 11.
What is a capitalist economic system?
Answer:
In capitalist system the country adopts a policy of free trade. In this system, the government does not interfere much. It allows the producer to take all the major decisions with respect to production and distribution.

Question 12.
What is a mixed economy?
Answer:
Mixed economy is a combination of socialist and capitalist economy. Under this system, the country allows businesses of certain sectors to do business freely whereas certain sectors are controlled by the government itself.

Question 13.
What is the position of national income, per capita income and national resources in developed countries?
Answer:
In a developed country, the level of gross national income and per capita income is high and all the available resources are fully developed.

Question 14.
What is the position of national income, per capita income and national resources in developing countries?
Answer:
In a developing country, the national income and per capita income show positive growth. Moreover, there is also a rising trend in the use of available resources and the standard of living.

Question 15.
What is the characteristic of agrarian economy?
Answer:
In agrarian economy, development of agriculture leads to the overall development of the economy. Majority of the resources are used in primary sector and hence the industrial growth is quite slow.

Question 16.
How do sectorial changes take place in the business environment as the country develops?
Answer:
As the country develops, the business environment rises and shifts from agriculture to industries and finally to service.

Question 17.
What will happen if the national income rises but the population does not rise proportionately?
Answer:
If the national income rises but the population does not rise proportionately, the rate of rise in per capita income will be more than the rate of rise in national income.

Question 18.
What is fiscal policy?
Answer:
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence national economy.

Question 19.
What is society formed of?
Answer:
Groups of people, social institutions, social traditions, etc.

Question 20.
Which factors are included in cultural factors?
Answer:
Factors like, traditions, practices, life style, habits etc. are part of cultural factors.

Question 21.
How technological factors affect business environment?
Answer:
There is a continuous change and updation in technology so as to provide better, faster and modern products and services to consumers. To meet these changes the manufacturer have to change their production patterns, machines, etc. This gives rise to new and dynamic business environment.

Question 22.
What are political factors with environment?
Answer:
Factors related to government and financial reference to business ideologies of the ruling party are known as political factors.

Question 23.
Which step was taken with respect to FDI under liberalization?
Answer:
Under liberalization, the government removed barrier of foreign direct investment (FDI) in Indian industries and also increased its limit. Government also introduced Demat to attract more FDI.

Question 24.
Which steps did government take to market?
Answer:
The government made the procedure of boost FDI in Indian equity purchase and sale of shares completely transparent by taking various steps. Demat services were introduced. The procedure of trading has been developed as per international norms.

Question 25.
How did government evolve tax policy?
Answer:
Government took several steps to make structure under liberalization the tax structure simpler and transparent. Procedure for sales tax and excise duty were simplified.

Question 26.
What changes did government bring with respect to currency? What benefit India gained?
Answer:
India introduced a new symbol of T for its currency so as to certify Indian currency. Indian currency (INR) is given few reliefs under certain terms and conditions in forex market.

Question 27.
State full form of FERA. Which Act replace it?
Answer:
FERA means Foreign Exchange Regulation Act. It was replaced by Foreign Exchange Management Act (FEMA).

Long Answer Type Questions

Question 1.
What do you mean by business environment? How is it created? Also classify the types of businesses on the basis of business environment.

• Each and every business is related to several factors of the society. These factors could be economic, social, cultural, technological, political and legal. These factors include many groups like consumers, competitors, suppliers of raw materials, employees, etc. The environment created by the group of all such factors that directly or indirectly affect the business is called business environment.
• No business can operate on its own aloof from the society i.e. the factors of the society affect the business environment and hence the business.
• Business environment is highly dynamic and also quite uncertain.

The businesses can be classified into three types on the basis of business environment. They are:

1. Business units that anticipate the environmental aspects well in advance and make necessary changes to the business.
2. Business units that bring necessary changes based on the existing environmental situation.
3. Business units that are not in a position to adjust to the existing environment easily.

Question 2.
Into which of the three categories does a business fall on the basis of / business environment?
Answer:

• Each and every business is related to several factors of the society. These factors could be economic, social, cultural, technological, political and legal. These factors include many groups like consumers, competitors, suppliers of raw materials, employees, etc. The environment created by the group of all such factors that directly or indirectly affect the business is called business environment.
• No business can operate on its own aloof from the society i.e. the factors of the society affect the business environment and hence the business.

Question 3.
How did policy decision regarding insurance evolve the industry and increased the opportunities?
Answer:
Helpful in policy decisions:
Understanding the business environment helps in deciding correct business policies.

Example:
Two types of insurance exist in India namely,

1. Life insurance and
2. General insurance.

• Initially, the government companies used to take care of insurance business, but in 1991, the government changed its policy and allowed private companies to enter into insurance business.
• Government saw that the business was expanding in India and it became quite important to expand insurance services so that people could do business with ease.
• Later, the government also allowed foreign direct investment in private Indian
  insurance companies. This further allowed various new business houses to enter in the field of insurance.
• These policy decisions have expanded the insurance business in India as a result of which today even a very common man is able to avail insurance.

Question 4.
Give only names of factors and sub-factors related to business environment.
Answer:
The business environment is highly dynamic and also quite uncertain.
(A) Internal factors

• Business objectives
• Employees
• Managerial systems i.e. organizational structure

(B) External factors

• Economic factors
  (a) Economic systems
  (b) Degree of economic development
  (c) Regional development and international integration
  (d) National and per capita income
  (e) Distribution of national income
  (f) Monetary policy
  (g) Fiscal policy
  (h) Other factors
• Social factors
• Cultural factors
• Technological factors
• Political factors
• Legal factors

Question 5.
Which internal factors affect the business environment?
Answer:

• The factors which can mostly be controlled by the managerial personnel of the organization are called internal factors of business environment.
• The managers can make necessary changes to such factors as per the objectives of business, employees, organizational system, etc.

Internal factors are mainly of three types.
They are:

1. Business objectives
2. Employees
3. Managerial systems i.e. organizational structure

Question 6.
What do you mean by external factors of business environment?
Answer:

• The factors which cannot be controlled by the managerial personnel of the organization are called external factors of business environment.
• In order to survive in the market and keep going with the competition, the business has to make necessary changes with regard to external factors.

These factors can be broadly classified as:

• Economic factors
• Social factors
• Cultural factors
• Technological factors
• Political factors
• Legal factors

Question 7.
Write a detailed note on economic factors affecting business environment.
Answer:

• The economic factors of a country play a major role in deciding the special features or limitation of its economy or society.
• The size and the nature of business development are also dependent on economic factors prevailing in the nation.

Following economic factors affect the business environment of the country:
1. Economic system:

• The organized way in which a country allocates resources and distributes goods and services is known as the economic system of that nation.
• How the country functions and in which direction is its economy moving is ascertained by the economic system that the country follows.

There are three major types of economic system existing in the world:
(A) Capitalist economic system:

• If the country follows capitalist economic system, it means that the country will adopt a policy of free trade.
• In this system, the government does not interfere much. It allows the producer to take all the major decisions with respect to production and distribution.

(B) Socialist system:

• The economic system which is controlled and regulated by the government so as to ensure welfare and equal opportunity for people of the society is known as socialist system.
• In this system, all major decisions are taken by the government. Individuals do not have a major role to play.

(C) Mixed economy (Mixed economic system):
India has adopted a mixed economy i.e. a combination of socialist and capitalist economy. Under this system, India allows businesses of certain sectors to do business freely whereas certain sectors are controlled by the government itself.

2. Degree of economic development:
By studying the business structure it can be known whether the country is economically developed, developing or underdeveloped i.e. one can know the degree of economic development.

The level of development determines the business environment in that country.
(A) Developed country:

• In a developed country, the level of gross national income and per capita income is high and all the available resources are fully developed.
• Such an environment encourages growth and development of business and industry. For example, America, UK, etc.

(B) Developing country:

• In a developing country, the national income and per capita income show positive growth. Moreover, there is also a rising trend in the use of available resources and the standard of living. For example, India.
• In such countries the business opportunities continuously increase. Also, the social structure keeps on transforming which then proves favourable for business.

(C) Underdeveloped country:

• In underdeveloped countries, income levels are very weak. This weakens the business development and hence the economic growth.
• Underutilization of available resources is easily visible. For example, Afghanistan.

3. Sectorial growth and inter-sectorial combinations:
A country’s economy is divided into three sectors namely,
(A) Agricultural,
(B) Industrial and
(C) Service.

The division of country’s economic activities among these sectors and the environment of these sectors largely affect the business environment.
(A) Agriculture (Primary) sector:

• If majority population of a country earns its livelihood from agriculture, then it can be said that agriculture is the primary sector of economy for that nation.
• In such a country, development of agriculture leads to the overall development of the economy.
• Majority of the resources are used in primary sector and hence the industrial growth is quite slow.

(B) Industrial (Secondary) sector:

• There is wide and large use of minerals and metals in an economy dominated by industries.
• The industrial sector employs large number of people for producing several goods.
• Strong hold of industrial sector leads to several innovations and modernization. This overall increases business opportunities.

(C) Service sector:

• The service sector comprises of providing social and economic services.
• Development of services such as transport, communication, banking, tourism, education, health, etc. fuels investment in various businesses. This in turn develops the economy.
• As the country develops, the business environment rises and shifts from agriculture to industries and finally to service. However, it is important that the country maintains a fine balance between these three sectors so as to have a healthy economic development and favourable business environment for all.

4. National income and per capita income:

• When the national income rises, it creates a favourable business environment.
• If the national income rises but the population does not rise proportionately, the rate of rise in per capita income will be more than the rate of rise in national income.
• When both, national income and per capita income rise, it increases the demand for goods and services and other basic necessities. This becomes favourable for business.
• Also, when income rises, the demand for superior quality goods i.e. luxurious goods and branded clothes also rises.

5. Distribution of national income:

• How the national income is distributed among the different sections of the society affects the business environment of that country.
• For example, if the distribution is quite unequal then there will be very high demand of luxurious and prestigious goods and services.
• If the distribution pattern changes, it will affect the demand for goods and services.

6. Monetary policy:

• The macroeconomic policy laid down by the central bank with respect to management of money supply, rate of interest, etc. is called the monetary policy.
• Monetary policy includes changes in interest rates, inflation rate, credit creation, credit availability, etc.
• If the interest rate on housing loan is reduced, the demand for houses will increase. This will also increase the demand of products of industries like cement, steel, furniture, sand, raw dust, bricks, etc. related to housing.

7. Fiscal policy:

• Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence national economy. Thus, fiscal policy depends on the tax structure and governmental expenditure.
  1. How can the tax structure be made effective for individual, units and the entire industry.
  2. How much is the effect of public expenditure on economic activities.
• The framework of fiscal policy largely impacts the business environment of the nation.

8. Other factors:
Apart from factors discussed above, other factors such as raw materials, its supply, components of machinery, financial facilities, manpower and its productivity etc. also affect the economy and the business environment.

Question 8.
How do social factors affect business environment?
Answer:
Effect of social factors on business environment:

• All the business activities originate, grow and end in the society. So naturally, society plays a major role in the environment it gives for the business activities.
• A business activity can never be separated from society. Society represents groups of people, social institutions, social traditions, etc.
• The society of a nation constantly evolves and hence is dynamic in nature. As a result, the lifestyle, preferences and practices also keep on changing. All these factors change the business environment too.
• Beliefs and ideologies of people cannot remain same throughout. So, with time people give importance to their decisions, ideologies and rituals to achieve their development.
• Before producing several type of products the producer needs to consider religion, caste, sect, social norms, ideologies, etc. that exists in a particular society. The decision for the economic activity will be largely affected by these parameters.
• For example, if the society is quite conservative with respect to clothing, then the producer should not produce very bold clothes else he will face loss.
• The society or a section of society which does not restrict itself to all these social constraint develops much faster. People of such societies are open to new ideas and are ready to accept new products. As a result, business activities have a higher chance to innovate and expand.

Question 9.
How do cultural factors affect business environment?
Answer:
Effect of cultural factors on business environment:
Factors like, traditions, practices, life style, habits etc. are part of cultural factors. These factors affect the decisions that a business unit takes.

• If the business management ignores the cultural factors prevailing in a society, there are high chances for the business to fail.
• History has recorded several examples where in companies having strong management have failed by neglecting cultural factors. And at the same, time various products which are not economically acceptable have become acceptable because of cultural factors and they have become successful.
• Cultural factors are constantly changing and these changes are constant and periodical.

Question 10.
Explain how technological factors affect business environment?
Answer:
Effect of technological factors on business environment:

• Technological factors affect the production decision and hence the business environment of a region.
• Based on the technological factors, the producer needs to decide as to what technology should he adopt to produce goods so that he can deliver the best possible products and increase profit.
• Research and Development (R & D) takes place at a very fast rate across the world. This leads to constant improvement in technology of production and processing methods. The country has to adopt these changes else it will not be able to compete the international market and the businesses will start making losses. For example, there was a time when India believed that use of machines should be kept at its lowest to enable employment generation. But India had to adopt fast mechanization owing to liberalization of industrial policy.
• Many industries have started using robotic machines. Using such machines products can be produced much faster that too with very high precision.
• In banking sector, internet banking and mobile banking have become quite common now. People use these technologies to save time and effort. These technologies have given rise to a new level of business environment where in the need for development of banking software, mobile applications, etc. have increased tremendously.

Question 11.
Explain how political factors affect business environment.
Answer:

• Factors related to government and financial ideologies of the ruling party are known as political factors.
• The ruling parties frame various laws in the nation. They also establish several policies to expand trade and commerce in the nation. How well the party does all these tasks decide the business environment of the nation.

Example:

• In West Bengal, there was a large opposition for Nano car project of Tata group. This opposition was so fierce that Tata group had to leave West Bengal. Gujarat government took this as opportunity and provided various incentives to the Tata group to establish their Nano car production plant at Sanand near Ahmedabad.
• Tata agreed and as a result, several ancillary industries also came up at Sanand along with Tata. This is a fine example of active role of the political party to grab the opportunity and establish positive business environment.

Question 12.
Discuss the West Bengal industrial conflict as a business opportunity for Gujarat.
Answer:

• In West Bengal, there was a large opposition for Nano car project of Tata group. This opposition was so fierce that Tata group had to leave West Bengal. Gujarat government took this as opportunity and provided various incentives to the Tata group to establish their Nano car production plant at Sanand near Ahmedabad.
• Tata agreed and as a result, several ancillary industries also came up at Sanand along with Tata. This is a fine example of active role of the political party to grab the opportunity and establish positive business environment.

Question 13.
Write a note on legal factors affecting business environment.
Answer:
Legal factors affecting business environment:

• Acts approved by the Parliament and/or the Assembly which then become laws become the legal factors that affect the economy of the nation. Every business unit need to follow these acts.
• In order to boost business as well as maintain social welfare, the government passes various laws.
• Industrial Development and Regulation Act 1951, Essential Commodities Act 1955, Trade Mark Act 1969, Standard of Weights and Measures Act 1969, Consumer Protection Act 1986, etc. are few examples of trade related laws passed by the government.
• As per the need of the hour, the government also amends the laws and at times removes the unnecessary laws. For example, when the government amended Monopolies and Restrictive Trade Practices (MRTP) Act 1951, several Indian companies could grow and make themselves at par with international companies.

Question 14.
What is economic system? What can you learn by knowing the economic system of a country?
Answer:

• The organized way in which a country allocates resources and distributes ‘ goods and services is known as the economic system of that nation.
• How the country functions and in which direction is its economy moving is ascertained by the economic system that the country follows.

Question 15.
Explain the various types of economic system that countries follow.
Answer:
Economic system:

• The organized way in which a country allocates resources and distributes goods and services is known as the economic system of that nation.
• How the country functions and in which direction is its economy moving is ascertained by the economic system that the country follows.

There are three major types of economic system existing in the world:
(A) Capitalist economic system:

• If the country follows capitalistic economic system, it means that the country will adopt a policy of free trade.
• In this system, the government does not interfere much. It allows the producer to take all the major decisions with respect to production and distribution.
• Such a free trade policy boosts the economy.
• America, UK, Germany, etc. follow capitalist system.

(B) Socialist system:

• The economic system which is controlled and regulated by the government so as to ensure welfare and equal opportunity for people of the society is known as socialist system.
• In this system, all major decisions related to how much to produce, what to produce and how to produce and distribute are taken by the government. Individuals do not have a major role to play as far as decision making is concerned.
• China follows socialist system.

(C) Mixed economy (Mixed economic system):

• The economy which has some features of capitalist economy and some of socialist economy is called mixed economy.
• India has adopted a mixed economy. Under this system, India allows businesses of certain sectors to do business freely whereas certain sectors are controlled by the government itself.

Question 16.
Why is government alert about the relationship between business and social welfare?
Answer:

• Any business activity is practically meant for the development of the entire society. Business activities are designed with the objective of attaining speedy economic development and increasing the welfare activities.
• There is a direct relationship between development of business and welfare of society. The government sees to it that businesses grow ethically. It frames various policies and regulations to nullify the long term negative impacts if any from the business to society.
• Hence, the government is alert that although business development should be fast, it should not have adverse impact on the society.

Question 17.
Sectorial changes bring about a favourable business environment.
Answer:

• All the three sectors of an economy are dependent on each other and so development of one sector will lead to the development of the other. For example, to boost agriculture sector, people will have to adopt mechanization i.e. have to move towards industrial sector. Once the production rises, the country will require a strong infrastructure of services such as warehousing, transportation, communication, insurance, etc.
• So, sectorial changes bring about a favourable business environment.

Question 18.
What are the main objectives of fiscal policy?
Answer:
The main objectives of fiscal policy are:

• Maximum utilization of resources and factors
• Distribution of resources in the best possible manner to achieve fast economic development
• Bring about equal distribution of resources in the best possible way
• Stabilize prices of goods and services

Question 19.
What opportunities do business environment create?
Answer:
Opportunities created by business environment:

• If the country follows capitalistic type economic system, it means that the country will adopt a policy of free trade. In this system, the government allows
  the producer to take all the major decisions with respect to production and distribution. The business unit can take advantage of this policy.
• Government implements several schemes for the growth of the three major sectors such as agriculture, industries and service. These schemes open new doors of growth and opportunities.
• As the developing country grows, industries such as transport, communication, banking and insurance, etc. also get boosted. New employment is generated and national income increases.
• When the national income increases, demand for luxurious and prestigious products increase. This creates opportunities for market of such products.
• With the advancement of society, people’s preference, taste and adaptability towards new goods increase. This gives rise to new markets and hence opportunities.
• If changes in the monetary policy are positive, the demand for capital for new businesses, new house, etc. increases. Also, opportunities for steel, cement, banking and insurance, etc, industries increase.
• Ruling parties can pass certain acts favourable to the society and industry. These acts create business opportunities. For example, development of public infrastructure, cleanliness drive, moving to eco-friendly products, etc. all create new opportunities.

Question 20.
What obstacles do business environment create?
Answer:
In socialist economy, the government controls and regulates the trade. In this system all major decisions are taken by the government. Individuals do not have a major role to play. Such a business environment is a hindrance to innovation and efficiency.

• The government gives various subsidies in the agriculture sector. As a result, people tend to remain in agriculture and do not move to other sectors. This hinders the employment rate of other sectors. Moreover, the capital distributed as subsidies could be used for important projects in other sectors.
• As the country develops, the business environment rises and shifts from agriculture to industries and finally to service. Flowever, it is important that the country maintains a fine balance between these three sectors. Many a times, the balance gets disturbed and the other sectors do not get proper attention.
• Rise in national income increases demand for better and luxurious products. But, if the income is unequally divided then it leads to class difference and social conflicts.
• If the political parties are biased and slow in decision making, the decisions taken become obstacle for the growth of the nation.

Question 21.
Which steps did government take to increase foreign direct investment in India?
Answer:
1. The government removed barrier of foreign direct investment (FDI) in Indian industries. The government also increased the limit of FDI which was quite low before. Moreover, to attract foreign investors and businessmen, various economic and non-economic incentives and exemptions are being given.

2. To attract more foreign investments in Indian equity market, the procedure of purchase and sale of shares have been made completely transparent by taking various steps.

Dematerialization (DEMAT) service has been introduced to convert the physical shares in electronic form. Due to this the purchase and sale of shares and the transactions of money involved therein became more transparent. The procedure of trading has been developed as per international norms.

Question 22.
Which steps did government take to increase foreign direct investment in share market of India?
Answer:
To attract more foreign investments in Indian equity market, the procedure of purchase and sale of shares have been made completely transparent by taking various steps.

Dematerialization (DEMAT) service has been introduced to convert the physical shares in electronic form. Due to this the purchase and sale of shares and the transactions of money involved therein became more transparent. The procedure of trading has been developed as per international norms.

Question 23.
What is GST?
Answer:
The full form of GST is Goods and Service Tax. GST has replaced all types of sales tax and excise duties. The introduction of GST has simplified the tax structure and made it more transparent.

Question 24.
What was License Raj? Howdid India tackle it under the policy of liberalization?
Answer:
Before liberalization, most industries were dependent on licenses that they had to procure from the government by undergoing a very tedious and time consuming procedure. Critics called this as License Raj. After 1991, the government removed the License Raj (License System) and made the registration of new firms quite simple.

Question 25.
Enlist positive and negative effects of privatization.
Answer:
(A) Positive effects of privatization:

• Rise in production efficiency
• Absence of political interference
• Improved quality goods and services
• Systematic marketing
• Use of modern technology
• Hierarchical set-up for accountability
• Creation of competitive environment
• Advancement in research and development
• Advancement in modernization and innovation
• Maximum utilization of factors of production
• Growth of infrastructural facilities

(B) Negative effects of privatization:

• Exploitation of employees
• Misuse of powers by top management
• Unequal distribution of income and wealth
• Absence of job security
• Priority to profit
• Consumer exploitation, etc.

Question 26.
Enlist reasons for inefficient public sector units.
Answer:
Reasons for inefficient public sector units include:

• Bureaucracy
• Obsolete technology
• Rising corruption and bribery
• Absence of accountability
• Growing influence of labour unions
• Political interference, etc.

Multiple Choice Questions

Question 1.
Which factor does not affect business environment?
(A) Social
(B) Political
(C) Personal
(D) Legal
Answer:
(C) Personal

Question 2.
Which of the following companies have to update themselves the most?
(A) Automobile
(B) IT
(C) Building and construction
(D) Agriculture
Answer:
(B) IT

Question 3.
________ is not an advantage of business environment.
(A) Grabbing opportunity
(B) Sensitivity of management
(C) Identifying dangers
(D) Continuous investment
Answer:
(D) Continuous investment

Question 4.
Which of the following is notan internal factor affecting business environment?
(A) Business objectives
(B) Employees
(C) Managerial systems
(D) Legal system
Answer:
(D) Legal system

Question 5.
Which of the following is not an external factor affecting business environment?
(A) Degree of economic development
(B) Economic systems
(C) None of these
(D) Regional development and international integration
Answer:
(C) None of these

Question 6.
The economic system which is controlled and regulated by the government so as to ensure welfare and equal opportunity for people of the society is known as ________
(A) Capitalist system
(B) Democratic system
(C) Socialist system
(D) Mixed economy
Answer:
(C) Socialist system

Question 7.
Who takes major decisions in socialist economy?
(A) Public
(B) Producers
(C) Government
(D) Both (A) and (C) together
Answer:
(C) Government

Question 8.
In underdeveloped countries, resources are
(A) Used excessively
(B) Underutilized
(C) Hardly used
(D) Not at all explored
Answer:
(B) Underutilized

Question 9.
If the distribution is quite unequal then there will be very high demand of goods and services.
(A) Luxurious and prestigious
(B) Basic need
(C) Cheap and long lasting
(D) Cheap but functional
Answer:
(A) Luxurious and prestigious

Question 10.
The macroeconomic policy laid down by the central bank with respect to management of money supply, rate of interest, etc. is called the ________ policy.
(A) Budgetary
(B) Financial
(C) Fiscal
(D) Monetary
Answer:
(D) Monetary

Question 11.
Which of the following is not a trade related act?
(A) Essential Commodities Act 1955
(B) MRTP Act 1951
(C) Consumer Protection Act 1986
(D) None of these
Answer:
(D) None of these

Question 12.
In India, there were several restrictions on private business units between the year
(A) 1947 and 1991
(B) 1951 and 1991
(C) 1991 and 2001
(D) 1959 and 1999
Answer:
(A) 1947 and 1991

Question 13.
The policy of liberalization, privatization and globalization was declared in ________
(A) June 1999
(B) July 1991
(C) May 1995
(D) August 1992
Answer:
(B) July 1991

Question 14.
The full form of GST is
(A) Goods Sold Tax
(B) Goods and Sales Tax
(C) Goods and Service Tax
(D) Goods and Services sold Tax
Answer:
(C) Goods and Service Tax

Question 15.
In FERA, ‘R’ stands for
(A) Rule
(B) Regulation
(C) Right
(D) Restrictive
Answer:
(B) Regulation

Question 16.
In MRTP,‘P’stands for
(A) Policy
(B) People
(C) Practices
(D) Permission
Answer:
(C) Practices

Question 17.
Which of the following was not a reason of privatization?
(A) Bureaucracy
(B) Absence of accountability
(C) Growing influence of labour unions
(D) Dearth of capital
Answer:
(D) Dearth of capital

Question 18.
________is not a benefit of privatization.
(A) Creation of competitive environment
(B) Maximum utilization of factors of production
(C) Growth of infrastructural facilities
(D) None of these
Answer:
(D) None of these

Question 19.
Which of the following is a negative effect of privatization?
(A) Exploitation of employees
(B) Misuse of powers by top management
(C) Over utilization of factors of production
(D) Both (A) and (B)
Answer:
(D) Both (A) and (B)

Question 20.
WTO replaced
(A) GATT
(B) MRTP
(C) FEMA
(D) FERA
Answer:
(A) GATT

Business Environment – GSEB Std 12 Organization of Commerce and Management Notes

Business environment:

• Business environment includes economic, social, cultural, technological, political and legal factors. Apart from these, various groups like consumers, labourer, competitors, suppliers of raw materials, etc. are also included in business environment.
• The environment created by the group of all such factors that directly or indirectly affect the business is called business environment.

Importance:

• Advantage of early entry
• Sensitivity of management
• Grab opportunities
• Identifying dangers
• Helpful in policy decisions
• Continuous Study

Factors affecting business environment:

1. Internal factors and
2. External factors

1. Internal factors:

• Business objectives
• Employees
• Managerial system (organizational structure), etc.

2. External factors:

• Economic Factors:
  (a) Economic system
  (b) Degree of economic development
  (c) Regional development and international integration
  (d) National income and per capita income
  (e) Distribution of national income
  (f) Monetary policy
  (g) Fiscal policy
  (h) Other factors.
• Social factors
• Cultural factors
• Technological factors
• Political factors
• Legal factors

Liberalization, Privatization and Globalization:
(A) Liberalization:
The movement of business and trade from a controlled to an open and free system is called liberalization.

Effects of liberalization:

• Acceptance of foreign capital investment in Indian industry and business
• Transparency in the purchase and sale and delivery, payment system in the share market
• Simple tax structure
• New sign of Indian currency T and subject to certain conditions, Indian rupee is free against the foreign currency
• Elimination of license raj
• Integrated effort to increase exports
• Widespread changes in the laws relating to foreign exchange
• Changes in the Monopolies and Restrictive Trade Practices (MRTP) Act
• Conditional freedom to banks for fixing rate of interest
• Ease to import goods and services

(B) Privatization:
Transferring of ownership and management from the control of public sector to private companies or private industrial units is known as privatization.

Positive effects of privatization:

• Rise in productive efficiency
• Absence of political interference
• Quality goods and services
• Systematic marketing ‘
• Use of modern technology
• Hierarchical set up for accountability
• Creation of competitive environment
• Advantage of research and development
• Advantage of modernization and innovation
• Maximum utilization of factors of production
• Availability of infrastructural facilities.

Negative effects of privatization:

• Exploitation of employees
• Misuse of power by top management
• Unequal distribution of income and wealth
• Absence of job security
• Priority to profit
• Consumer exploitation, etc.

(C) Globalization:
When any country allows foreign companies to do business in their domestic economy and domestic companies allow to do business globally, it is known as globalization.

Positive effects of globalization:

• Large scale production
• Increased competition leads to greater consumer protection
• Consumers get improvised, technically upgraded product at an economical price
• Opportunities of employment generation
• Consumers will be able to use quality products and service at a low price
• Speedier generation of infrastructural facilities in the country
• Increased importance of education has led to increase in spread of education
• Easier to set up new industries
• The whole world is becoming a global village
• Freedom from political bureaucracy and red tapism

Negative effects of globalization:

• Arrangement for market set-up becomes difficult and costly
• Rise in the production of luxurious goods and services at the cost of necessities
• New problems arise because of the change in human mentality
• Rise in inequalities of income and wealth distribution
• Spread of economic situation of one country or continent to other countries quickly
• Competition is at the cost of destruction of ethical values
• Larger units get more profit and small scale units experience difficulty to survive
• When the spread of education is relatively lesser than the spread of development, the competitive ability of employees become weak
• Multinational companies show more loyalty to their home country rather than to the host country
• Internationally renowned companies influence the monetary policy of the country which is suitable to them by collaborating with the political parties.