UGC NET Paper 2 Commerce Mock Test - 6 - UGC NET MCQ

The correct answer is a - 3, b - 4, c - 1, d - 2

Key Points F. Modigliani's Life Cycle Income Hypothesis:

Franco Modigliani proposed the Life-cycle Hypothesis in 1957.

According to the hypothesis, people try to spread their consumption out over their lives by borrowing during times of low income and saving during times of high income.

The graph shows individuals save from the age of 20 to 65.

• It is reasonable for a student to borrow money to pay for his or her education.
• After that, you pay off your student loans and start investing for retirement during your working life.
• This saving during your working years allows you to retain similar income levels after retirement.

It suggests wealth will build up in working age, but then fall in retirement.

J.M. Keynes' Absolute Income Hypothesis:

• John Maynard Keynes was the first to examine consumption expenditures from a macroeconomic standpoint, which was called Absolute Income Hypothesis .
• According to Keynes, consumption expenditures are the function of disposable income. So, there is a positive relationship between consumption expenditures and disposable income.
• Disposable income is explained by Keynes as follows:
  • Yd = Y+ TR - T 
• In the equation, Yd = disposable income, Y = income, TR = transfer expenditures, and T = taxes
• According to Keynes, as an increase occurs in disposable income, it creates an increase in consumption expenditures.
• The mathematical explanation of the phrase is C = C₀ + cY_d  c < 1

 Milton Friedman's Permanent Income Hypothesis:

• Milton Friedman, the Nobel Laureate economist, proposed the persistent income hypothesis in 1957.
• According to the hypothesis, changes in consumer behaviour are not predicted, because they are based on individual expectations.
• The permanent income hypothesis states that individuals will spend money at a level that is consistent with their expected long-term average income.
• According to the hypothesis, even if economic measures boost income, this does not always translate into higher consumer spending.

 James Duesenberry's Relative Income Hypothesis:

• The basic claim of Relative Income Hypothesis developed by James Duesenberry is that the expenditure on consumption is dependent not only on current income but also on the income of the environment in which the individuals are.
• The consumption expenditures of people are affected by the behaviours of people in their environment. 
• People observe their environment while creating their consumption expenditures. In that case, consumption expenditures will depend not only on income, bu also on the relative condition of the people around.

The correct answer is Option 3

Key Points 

Important PointsAbsolute Cost Advantage Theory:  

• According to Adam Smith, the father of economics, the basis of international trade is absolute cost advantage. 
• According to his hypothesis, trade between two nations would benefit both sides if one country could manufacture one product at an absolute advantage over the other, and the other countries could create another commodity at an absolute advantage over the first.
• The principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.

Comparative Cost Advantage Theory:

• The law of comparative advantage is widely credited to David Ricardo, an English political economist who published "On the Principles of Political Economy and Taxation" in 1817.
• The principle of comparative costs is based on the differences in production costs of similar commodities in different countries.
•  Production costs differ in countries because of geographical division of labour and specialisation in production
• According to this theory, Comparative differences in cost occur when one country has an absolute advantage in the production of both commodities, but a comparative advantage in the production of one commodity than in the other. 

Factor Endowment Theory:

• The H-O theory is also known as the factor-proportions theory or factor-endowment theory. Bertil Ohlin (1899–1979), a Swedish economist, created the idea based on the work of his master, Swedish economist Eli Filip Heckscher (1879–1952).
• The theory states that a nation will export the product that uses its most abundant factor intensively. 
• The H-O model explains comparative advantage in terms of the factor abundance of nations and the factor intensity of commodities.
• According to the H-O theory, a commodity will be produced more cheaply by a country that has a lot of the input that the commodity utilises the most. If a commodity requires a significant quantity of capital, capital-rich countries will have a comparative advantage in that commodity. A country will export the product that makes extensive use of its most abundant resource. This means that the country will import the product that makes extensive use of the country's scarce resource.

Leontief Paradox : 

• Leontief measured the labour and capital content of a representative basket of exports and import-competing goods. Leontief's result, known as the Leontief Paradox, was that the United States imports capital-intensive goods and exports labor-intensive goods, in direct opposition to the predictions of the H-O model
• In economics, the Leontief paradox states that a country with more capital per worker has a lower capital/labour ratio in exports than in imports.

The correct answer is TATA Group.

Key Points

•  The philosophy of "Good Thoughts, Good Words, Good Deeds" is the motto of the Indian business house Tata Group. It is a Zoroastrian maxim that emphasizes the importance of positive thinking, speech, and action. The Tata Group has adopted this motto as a guiding principle for its business practices and its commitment to social responsibility.
• The Tata Group is one of the largest conglomerates in India. It was founded in 1868 by Jamsetji Tata, a Zoroastrian. Tata believed that businesses should not only make profits, but also contribute to society. He adopted the motto of "Good Thoughts, Good Words, Good Deeds" to reflect this belief.
• The Tata Group has a long history of social responsibility. It has donated billions of rupees to charitable causes, and it has set up several educational institutions and hospitals. The group has also been a pioneer in corporate social responsibility initiatives, such as the Tata Business Excellence Model (TBEM) and the Tata Sustainability Index (TSI).
• The Tata Group's commitment to "Good Thoughts, Good Words, Good Deeds" has made it a role model for other businesses in India. It is an example of how businesses can be profitable and socially responsible at the same time.

Hence, the correct answer is TATA Group

The correct answer is Both (A) and (R) are true, but (R) is not the correct explanation of (A).

Key Points

• Assertion (A): SEBI has the power to compel the listing of securities by public companies.
  • A company desirous of listing its securities on the exchange is required to file an application, in the prescribed format, with the exchange before issuing the prospectus by the company, where the securities are to be issued by way of a prospectus, or, before the issue of 'Offer for Sale', where the securities are to be issued by way of an offer for sale.
  • The company is responsible to follow all the requirements specified in the Companies Act, the listing norms issued by SEBI, and such other conditions and requirements that may be in force from time to time and included hereafter in the SEBI bye-laws and regulations to make the security eligible to be listed and for continuous listing on the exchange.
  • SEBI can compel a public company to get its securities listed on Stock Exchanges before making a public issue.

Thus, the assertion is correct.

• Reason (R): SEBI has the power to regulate insider trading or can regulate the functions of merchant bankers.
  • Insider trading refers to the act of buying or selling securities by the insiders of a company, which includes the directors, employees, and promoters.
  • As per the provisions of the Securities and Exchange Board of India Act 1992, no person shall directly or indirectly engage in insider trading.
  • To prevent the practice of insider trading, SEBI has barred the companies to purchase their own shares from the secondary market.

Thus, the reason is correct.

On the basis of the above information, it can be concluded that both the assertion and reason are correct, but, the reason is not the correct explanation of the assertion.

The Correct answer is ‘Industrial recession’.

 Key PointsRisk:

• Risk is the process of identifying, assessing, and controlling uncertainty in an entity's capital and earnings is known as risk management. These dangers arise from a variety of sources, including financial uncertainty, legal liabilities, technological issues, strategic management errors, accidents, and natural disasters.

 Important PointsCompany strike: This option is incorrect because Company strike is a type of risk that can be certain. it can be avoided by taking corrective actions.

Bankruptcy of a major supplier: This option is incorrect because Bankruptcy of a major supplier will not impact the Business.

Death of a key company officer: This option is incorrect because Death of a key company officer will not impact because usually company make Key Managerial insurance to protect such loss

Industrial recession: This option is correct because Industrial recession because it is specific risk factor which cannot be avoided by diversifying the company’s portfolio.

The correct answer is Amazon.com

Key Points

• A market challenger is a firm striving to increase its market share and replace the market leader.
• Usually, they are the second-largest dominant company in the market.
• They have sufficient resources and capabilities to aggressively challenge market leaders and undermine their dominance.
• Amazon.com is an example of a market challenger trying to steal Ebay’s market share in the online retail business.
• And, in general, you can find examples of market challengers at the second-largest companies in the industry.
• They may also be a third or fourth company if the difference in dominance (market share) is small relative to the market leader.

The correct answer is Amount spent on activities which only benefit the employees of the company

Key PointsActivities that doesn't qualify as CSR Expenditure:

• CSR projects or programs or activities that benefit only the employees of the company and their families
• One-off events such as marathons/ awards/ charitable contributions/advertisements/sponsorships of TV programs etc. 
• Expenses incurred by companies for the fulfilment of any Act/ Statute of regulations (such as Labour Laws, Land Acquisition Act, etc.)
• Contribution of any amount directly or indirectly to any political party
• Activities undertaken by the company in pursuance of its normal course of business.

The first step in the Customer Experience Management Process is to develop ​customer experiences that lead to lasting relationships and referrals.

• Customer experience is defined as your customers’ perceptions – both conscious and subconscious – of their relationship with your brand resulting from all their interactions with your brand during the customer life cycle.
• Customer experience management is the practice of designing and reacting to customer interactions to meet or exceed customer expectations and, thus, increase customer satisfaction, loyalty, and advocacy.
• Customer experience management is about more than serving your customers.
• It’s about more than knowing where customers shop and what brand of dog food they buy.
• It's about knowing your customers so completely that you can create and deliver personalized experiences that will entice them to not only remain loyal to you but also to evangelize to others about you – and that’s the most valuable form of advertising there is.
• The crux of having a customer experience management process involved in business activity is to give customers such experiences that lead to lasting relationships and referrals.

Statement I: Intellectual Property (IP) is a category of property that includes intangible creations of the human intellect.

Explanation:

1. Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.
2. Intellectual property is an umbrella term for a set of intangible assets or assets that are not physical in nature.
3. Intellectual property (IP) is a category of property that includes intangible creations of the human intellect.
4. There are many types of intellectual property, and some countries recognize more than others.
5. The most well-known types are copyrights, patents, trademarks, and trade secrets. Thus, the statement I is correct.

Statement II: IPR does not include trade secrets and moral rights.

Explanation:

Intellectual property can consist of many types of intangibles, and some of the most common are listed below:

1. Trademarks: Trademarks are the names, phrases, and symbols that differentiate your brand from others in your industry. They must be distinctive and used in commerce to sell or promote a product or service.
2. Copyrights: A copyright grants legal rights to anything you create that expresses or embodies an idea. It gives you exclusive rights to copy, distribute, reproduce, display, and license the work.
3. Patents: Patents are granted for new, useful inventions, and they will give you the right to prevent others from making, using, or selling your invention.
4. Trade Secrets: A trade secret is a piece of confidential business information whose secrecy gives you an advantage over your competitors.
5. Moral Rights: Moral rights are personal legal rights belonging to the creator of copyright works and not be transferred, assigned, or sold. Moral in other words-“Moral rights are the rights individual creators have in relation to copyright works or films they have created.
6. Franchise: A franchise is a license that a company, individual, or party–called the franchisee–purchases allowing them to use a company's–the franchisor–name, trademark, proprietary knowledge, and processes.

Thus, statement II is incorrect.

Option 3 is the correct answer.

The correct answer is Geographical indication.

Key Points

•  Mysore silk can be included under the Geographical Indication (GI) tag. A GI tag is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
• Mysore silk is a type of silk that is produced in the Mysore region of Karnataka, India. It is known for its fine quality and soft texture. The silkworms that are used to produce Mysore silk are fed on mulberry leaves that are grown in the region. The climate and soil conditions in the Mysore region are also ideal for the production of silk.
• The GI tag for Mysore silk was granted by the Government of India in 2004. The tag protects the name "Mysore silk" from being used by other producers. It also helps to promote the sale of Mysore silk and to ensure that consumers get the genuine product

RBI Monetary Policy is the policy formulated by the Reserve Bank of India to regulate the money matters of the country.

• The policy takes into account the distribution of credit among users as well as the rate of interest on borrowing and ling.
• Since India is a developing country, monetary policy is significant in the promotion of economic growth.
• The policy involves measures taken to control inflation, regulate the supply of money and the cost of credit in the economy.
• The various instruments of monetary policy include variation in bank rates, other interest rates, supply of currency, etc.
• In addition to that, the current repo rate, reverse repo rate, marginal standing facility rate, and bank rate also come under the RBI Monetary Policy.

The correct answer is "Indirect communication among sellers and potential buyers".

Key Points

• The goal of promotion is to communicate to consumers that they need this product and that it is priced appropriately.
• Promotion encompasses advertising, public relations, and the overall media strategy for introducing a product.
• Promotion is a marketing tool, used as a strategy to communicate between the sellers and buyers.
• Through this, the seller tries to influence and convince the buyers to buy their products or services. ​

Additional Information

• It assists in spreading the word about the product or services or company to the people.
• The company uses this process to improve its public image.
• This technique of marketing creates an interest in the mindset of the customers and can also retain them as a loyal customer.
• Promotions tend to focus on how to attract the attention of consumers and motivate them to take action or make a purchase via eCommerce or other channels.
• Ensure the right consumers are reached and objectives are met.
• In order to accomplish this, brands must look closely at the many ways to market/promote and decide which methods are most likely to reach the desired consumer demographic. 

Key Points The correct match is given below:

Important Points 

Assessment year:

• The Assessment Year is defined under Section 2(9) of the Income Tax Act as the period of 12 months starting from April 1 of every year and ending on March 31 of the following year.
• It is the year following the financial year in which the income is earned and assessed for taxation purposes.

Capital asset:

• Capital Asset is defined under Section 2(14) of the Income Tax Act as any kind of property held by a taxpayer, whether or not connected with their business or profession, but excludes certain assets such as stock-in-trade, personal effects, and agricultural land in rural areas.

Gross total income: 

• Gross Total Income is defined under Section 80B(5) of the Income Tax Act as the total income of a taxpayer before making deductions under Chapter VI-A of the Act.

Perquisite-

• Perquisite is defined under Section 17(2) of the Income Tax Act as any benefit or amenity granted to an employee by their employer, which is chargeable to tax as a part of the employee's income.
• Examples of perquisites include rent-free accommodation, use of a company car, and club memberships paid for by the employer.

Hence, A-II, B-IV, C-III, D-I is the correct answer. 

The correct answer is Assertion is incorrect, but Reasoning is correct.

Key PointsAs per the passage, "Despite these advantages, there are challenges, particularly the restriction on individual countries' monetary policies as monetary policy is decided by the ECB, not individual countries."

The correct answer is It reduces transaction costs.

Key PointsAs per the passage, "For businesses, it provides pricing transparency and reduces transaction costs, aiding in the increase of cross-border trade within the Eurozone."

Exim policy is a set of guidelines and instructions established by the DGFT in matters related to the import and export of goods in India. The foreign trade policy of India is guided by the Export-Import in known as in short EXIM Policy of the Indian Government and is regulated by the Foreign Trade Development and Regulation Act, 1992. The main objective of the Foreign Trade (Development and Regulation) Act is to provide the development and regulation of foreign trade by facilitating imports into and augmenting exports from India. Foreign Trade Act has replaced the earlier law known as the imports and Exports (Control) Act 1947.

Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment.

• It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.
• Business ethics refers to contemporary standards or sets of values that govern the actions and behavior of an individual in the business organization.
• Business ethics reflects the philosophy of business, of which one aim is to determine the fundamental purposes of a company.
• If a company's purpose is to maximize shareholder returns, then sacrificing profits to other concerns is a violation of its fiduciary responsibility.

Hence, the correct option (A).

The Nasdaq Stock Market is an American stock exchange. It is the second-largest exchange in the world by market capitalization, behind only the New York Stock Exchange. The Nasdaq Stock Market has three different market tiers: 
Capital Market (small cap) is an equity market for companies that have relatively small levels of market capitalization. Listing requirements for such "small cap" companies are less stringent than for other Nasdaq markets that list larger companies with significantly higher market capitalization. 
Global Market (mid-cap) is made up of stocks that represent the Nasdaq Global Market. The Global Market consists of 1,450 stocks that meet Nasdaq's strict financial and liquidity requirements, and corporate governance standards. 
Global Select Market (NASDAQ-GS large-cap) is a market capitalization-weighted index made up of US-based and international stocks that represent the Global Select Market Composite. The Global Select Market consists of 1,200 stocks that meet Nasdaq's strict financial and liquidity requirements and corporate governance standards. The Global Select Market is more exclusive than the Global Market. Every October, the Nasdaq Listing Qualifications Department reviews the Global Market Composite to determine if any of its stocks have become eligible for listing on the Global Select Market.

Interest paid on debenture is a liability and it is fixed in nature. In the case of dividends, it is not fixed in nature to pay. Dividends are the appropriation of profits earn by the company on the other hand debenture is a long term liability of a company and its interest is expense not appropriation of profits.

The transfer by a company of one or more of its business divisions to another new set up company is called demerger.

The term 'demerger' simply means one company transferring one or more of its business operations into another company. The company that transfers such business operations is known as the “demerged” company, while the company to which the business is transferred is known as the “resulting” company.

Investment in Equity shares is the most risky. The higher the volatility of a stock, or any asset, the higher its risk. Unit trusts that invest only in equities are higher risk than those that invest in other assets. Their prices move further and the chance of loss is higher.

A breach of contract can happen in both a written and an oral contract. The parties involved in a breach of contract may resolve the issue among themselves, or in a court of law. There are different types of contract breaches, including a minor or material breach and an actual or anticipatory breach.

• PAN stands for Permanent Account Number. A PAN number is a ten-digit number in alphabets and numerical, or in 'alphanumeric' terms, that is allocated by the income tax department to all the taxpayers, and is unique with each individual.
• Form No. 16 is an acknowledgment which states your deducted tax has been deposited with the Income Tax department.
• Aadhar Card is an individual identification number issued by the Unique Identification Authority of India (UIDAI) on behalf of the Government of India to individuals for the purpose of establishing the unique identity of every single person.

Statement II is also correct for the fact that the reviews posted on the websites of the e-commerce companies are not always true and there is no way to find out if they are true or fake or even the discounts are not always for real. Refer to, “There are no authentic ways to figure out if product reviews, ratings or even discounts are genuine.”

Brainstorming combines a relaxed, informal approach to problem-solving with lateral thinking. It encourages people to come up with thoughts and ideas that can, at first, seem a bit crazy. Some of these ideas can be crafted into original, creative solutions to a problem, while others can spark even more ideas.A business game is an interactive structured training activity with specially created conditions, which aim to reproduce those of a working situation in a successful business.Role-playing the acting out of the part of a particular person or character, for example as a technique in training or psychotherapy.

    Correct match: