The Institute of Cost and Works Accountants of India 2009 CWA Foundation Economics and Business Fundamentals (Syllabus 2008) - Question Paper
June 2009: The Institute of Cost and Works Accountants CWA Foundation: Economics and Business Fundamentals (Syllabus 2008): June 2009 University ques. paper
CWA ICWA Foundation : Economics and Business Fundamentals - June 2009
P3(EBF)
Syllabus 2008
Time Allowed : 3 Hours Full Marks : 100
The figures in the margin on the right side indicate full marks.
SECTION I (Marks 60)
Answer Question No.1 which is compulsory and any two from the rest.
Marks
1. (a) Answer the following : 1x9
(i) Economics is
(A) normative science
(B) positive science
(C) human science
(D) political science
(ii) Deductive method involves
(A) Moving from general to particular
(B) Moving from particular to general
(C) Using mathematical reasoning
(D) Applying ethical reasoning
(iii) Portfolio investment means
(A) Depositing money into a company
(B) Buying debenture of a company
(C) Buying shares of a company
(D) Investing in fixed assets
(iv) Diamond-water paradox is explained through
(A) Law of substitution
(B) Law of exchange
(C) Law of supply
(D) Law of diminishing marginal utility
(v) Theory of Demographic transition was developed by
(A) Malthus
(B) Pigou
(C) Walker
(D) Keyness
(vi) Bank rate policy is a
(A) Quantitative method
(B) Qualitative method
(C) Optional method
(D) Fiscal method
(vii) The theory of absolute cost advantage was developed by
(A) David Recardo
(B) Malthus
(C) Adam Smith
(D) Marshall
(viii) Balance of Trade
(A) Includes balance of payments statement
(B) Excludes balance of payments
(C) Includes value of merchandise transaction alone
(D) Includes value of service transactions
(ix) Direct taxes
(A) Are shiftable
(B) Are not shiftable
(C) Reflect economic health
(D) Affect social welfare
(b) Fill in the blanks :
1x12
(i) Backward bending supply curve of labour indicates that labour prefers_to work at a
high wage rate.
(ii) Total economic costs = Explicit costs +_+ Normal profit.
(iii) Internal economies accrue to a firm when it_.
(iv) When consumer is made to pay one price upto a certain amount of purchase and another price for purchases exceeding this amount, it is called price discrimination of_degree.
(v) Net national product is also called_.
(vi) Cross elasticity of demand relates price of one good and demand for_good.
(vii) Investment multiplier = Change in Y/Change in_.
(viii) Creation of Saving and its productive investment is called_.
(ix )_function of money makes it available for future use.
(x) Central Banks persuasive method to control the functioning of the commercial banks is called_.
(xi) The bank which was established in 1985 to rehabilitate the sick industrial units with authorized capital of Rs.2.5 crores is_.
(xii) Paper Gold is also called_.
(c) State which of the following statement is "True" and which is "False".: 1x9
(i) The existence of oligopoly in the long-run requires the existence of free entry of the new firms.
(ii) Adding value of all goods and services produced to arrived at national income of a country is called income method.
(iii) Ratio of consumption to income is called marginal propensity to consume.
(iv) Ralating food production rate and population rate is Optimum Theory of Population.
(v) Aggregate demand remaining the same, a fall in aggregate supply results in cost push inflation.
(vi) Increased velocity of circulation of money causes recession.
(vii) The IFC (Transfer of Undertaking and Repeal) Bill passed on March 24, 1993 privatised the IFC.
(viii) Mutual funds operations in Private sector and joint sector are closely monitored by SEBI.
(ix) Factor cost differences occur because of different factor endowments in different countries.
(d) Define the following terms in not more than two lines: 1x6
(i) Marginal product:
(ii) Real differentiation:
(iii) Greshams law;
(iv) Credit creation;
(v) Regressive taxation;
(vi) Deficit financing.
2. What are the causes of inflation? What are its effects? How would you control it? 4+4+4
(a) Factors affecting supply;
(b) Cost-output relationship during short period.
4. Explain the law of diminishing marginal utility. What are the limitations of the law?
8+4
SECTION II (Marks 40)
Answer Question No. 5 which is compulsory and any two from the rest.
Marks
5. (a) Answer the following :
1x6
(i) After incorporation, a company conducts a meeting to deal with
(A) Issue of prospectus
(B) Appointment of broker for underwriting shares
(C) Appointment of a protem secretary
(D) All the above
(ii) In a stock exchange
(A) any security can be transacted
(B) only listed securities can be transacted
(C) only securities of private companies be traded
(D) any common person can conduct transaction directly
(iii) A stag operates
(A) to buy at a high price and sell at a low price
(B) to buy shares at a high price to make profit in due course
(C) to avoid buying at a high price but attempts to sell at a high price
(D) to enter into forward contracts
(iv) Schematic format of a report includes
(A) subheadings
(B) sequential subheadings
(C) emergency communication
(D) All the above
(v) Subsidiary company is one in which
(A) more than 40% shares are held by other company
(B) majority of directors are appointed by the Government
(C) more than 50% of the paid-up equity share capital is held by another company
(D) shareholders of the company form the majority
(vi) Social environment includes
(A) Taxation policies
(B) Culture and traditions
(C) Quality improvement
(D) Foreign direct investment
(b) Fill in the blanks: 1x6
(i) A person who just lends his name and reputation for the benefit of the firm without taking active part is called_.
(ii) Equity shares issued at a discount or for consideration other than cash for providing know how or making available rights in the nature of intellectual property rights are called_.
(iii) To alter a clause of memorandum of association, a_resolution is required.
(iv) The Securities Contracts (Regulation) Act was passed in_.
(v) When a buyer of a share acquires a share without any right to receive the dividend declared is called_.
(vi) Key result areas technique was suggested to discuss the business objectives by_.
(c) State which of the following statement is "True" and which is "False": 1x6
(i) Joint Hindu Family Business requires registration.
(ii) Registration of partnership is a statutory compulsion.
(iii) A company is a voluntary association.
(iv) Minimum subscription is necessary to cover underwriting commissions on sale of shares.
(v) Bargain price order specifies the price at which the broker can buy or sell the security.
(vi) Complimentary close in a letter refers to the signature of the sender.
(d) Define the following terms in not more than two lines: 1x6
(i) Unlimited liability;
(ii) Contingent dissolution;
(iii) Organic objective;
(iv) Company limited by guarantee;
(v) Barriers to communication;
(vi) Lame duck.
6. Write short notes on: 4+4
(a) Memorandum of Association;
(b) Salient features of a good business letter.
7. What is stock exchange? Discuss the functions of stock exchange. 2+6
8. State the meaning of business environment. Discuss the various types of business environment. 2+6
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