UGC NET Paper 2 Commerce Mock Test - 8 - UGC NET MCQ

The correct answer is Unsystematic risk.

Key Points The risk arising from the unique uncertainties of individual securities is known as unsystematic risk or specific risk.

Unsystematic risk is the risk that is unique to a particular security or asset. It is the risk that cannot be diversified away by holding a well-diversified portfolio.

Additional Information Some examples of unsystematic risk include:

• Company-specific risk: This is the risk that is related to the specific company, such as the risk of a product recall or a lawsuit.
• Industry-specific risk: This is the risk that is related to the industry that the company operates in, such as the risk of a decline in demand for the product or service that the industry provides.
• Country-specific risk: This is the risk that is related to the country in which the company is located, such as the risk of political instability or economic sanctions.

Unsystematic risk can be reduced by diversification. Diversification means holding a portfolio of assets that are not perfectly correlated with each other. This means that the risk of one asset will not perfectly offset the risk of another asset

The correct answer is the Long term.

Key Points

• Land Development Banks provide loans for long terms.
  • Long term means for a period of 5 years to 20 years.
  • A short term refers to less than or equal to one year.
  • Indian farmers need three types of credit, viz., short-term, medium-term and long-term.
  • Their short-term and medium-term credit requirements are fulfilled by the co-operative banking institutions.
  • Land development banks provide loans for the long term.

Additional Information

• A land development bank is a special kind of bank in India and is of a quasi-commercial type that provides services such as accepting deposits, making business loans, and offering basic investment products.
  • The main objective of the land development bank is to promote the development of land, agriculture and increase agricultural production.
  • The land development banks provide long-term finance to members directly through their branches.
  • The Land Development Banks are essentially cooperative institutions.
  • All the land development banks are registered under the Co-operative Societies Act.
    • In a strict sense, however, they are semi co-operatives.
    • They are limited liability associations of agricultural borrowers, as their members have limited liability.
  • Unlike other co-operatives, land development banks do not have personal involvement in their functioning.
  • The working capitals of land development banks are raised from share capital, deposits and debentures, and borrowings from the State Bank of India, commercial banks and the State Co-operative Banks. 
  • There is only one Central Land Development Bank in each state and one primary development bank at the district level.
  • Thus, a state is normally supposed to have many primary land development banks as there are several districts.
  • The Primary Land Development Banks are affiliated with the Central Land Development Bank in the State.

The correct answer is Managers area rational and objective and suppress the voicing of feeling by others

Key Points The feature that is not covered in Model I is double-loop learning.

Model I is a theory of action that describes how people typically behave in organizations. It is characterized by a number of features, including:

• Control: Model I seeks to control others and the environment.
• Independence: Model I emphasizes independence and self-protection.
• Advocacy: Model I advocates for one's own position, even if it means disregarding the views of others.
• Evaluative inquiry: Model I uses evaluative inquiry, which is a process of gathering information to support one's own position.
• Closed communication: Model I communication is closed and defensive.
• Double-loop learning is a process of learning that goes beyond simply changing one's behavior. It involves questioning the underlying assumptions and values that guide one's behavior. Model I does not explicitly address double-loop learning.

In contrast, Model II is a theory of action that describes how people can behave in organizations to promote double-loop learning. Model II is characterized by a number of features, including:

• Clarifying: Model II clarifies one's own values and assumptions.
• Empathizing: Model II empathizes with the values and assumptions of others.
• Testing for understanding: Model II tests for understanding by asking for feedback from others.
• Joint problem-solving: Model II engages in joint problem-solving with others.
• Open communication: Model II communication is open and collaborative.

Model II is a more effective way of behaving in organizations because it promotes double-loop learning. Double-loop learning allows people to change their behavior in a way that is aligned with their values and assumptions. This can lead to more effective and sustainable change in organizations.

The correct answer is Merger.

Key Points

• Mergers
  • It is a way for companies to expand their reach, expand into new segments, or gain market share.
  • It is the combining of two or more companies into one organization. Hence, Option 3 is correct.
  • It is the voluntary fusion of two companies on broadly equal terms into one new legal entity.
  • The five major types of mergers are conglomerate, congeneric, market extension, horizontal, and vertical.

Additional Information

The correct answer is 5.

​Key Points

• International Monetary Fund(IMF) publishes the Regional Economic Outlook.
• Regional Economic Outlook divides the world into five regions as
  • Asia and Pacific Region
  • Europe
  • Middle East and Central Asia
  • Sub-Saharan African
  • Western Hemisphere Region
• Regional Economic Outlook publishes the economic data and status of these five regions in detail.

Important Points 

• IMF(International Monetary Fund) established in 1945 and headquartered in Washington.
• IMF Managing Director is Kristalina Georgieva.
• Presently IMF has 190 member countries.
• They address regional policy developments and challenges, and provide country-specific data and analysis, including through analytical pieces on issues of interest to a particular region.
• There are five regions (Asia and Pacific, Middle East and Central Asia, Sub-Saharan Africa, Western Hemisphere and Europe).

The correct answer is Purchasing power parity theory

Key PointsPurchasing Power Parity Theory:

• Purchasing-power parity is a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries.
• The purchasing-power parity theory is the simplest and most widely accepted theory explaining the variation of currency exchange rates.
• The theory of purchasing-power parity is based in principle called the law of one price.
• When the central bank prints large quantities of money, the money loses value both in terms of the goods and services it can buy and in terms of the amount of other currencies it can buy.

Additional Information 1. The Fisher Effect:

• The Fisher Effect states that nominal interest rates (r) are a function of the real interest rate (a) and a premium (i) for inflation expectations.  R = a + i
• Real Rates of Interest (i) Should tend toward equality everywhere through arbitrage  (ii) With no government interference, nominal rates vary by inflation differential.
• According to the Fisher Effect, countries with higher inflation rates have higher interest rates.
• Due to capital market integration globally, interest rate differentials are eroding.

2. Mint Parity Theory:

• The theory of mint parity describes how the exchange rate between the two gold standard countries is determined.
• The currency of a country on the gold standard is either manufactured of gold or has its value stated in gold.
• The exchange rate under the gold standard is equivalent to the gold content of one currency relative to another, according to the mint parity theory. This rate is referred to as the mint rate.

3. Interest rate parity theory:

• One of the most important theories in international finance is interest rate parity, which is the best approach to explain how exchange rate values are determined and why they fluctuate. Understanding the primary motivations for foreign investment is crucial because the majority of international currency exchanges occur for investment purposes.
• Interest rate parity is a condition in which the rates of return on equivalent assets in two countries are equal. On the basis of how it is described here, the term is a misleading term; it should really be called rate of return parity.

4. Balance of Payment theory

• The free forces of demand and supply in the foreign currency market determine the price of foreign money in terms of domestic money, according to the balance of payments theory of exchange rate.
• As a result, the demand for and supply of a country's currency will determine the currency's external value.
• According to the theory, a balance of payments deficit causes the rate of exchange to decrease or depreciate, whereas a surplus strengthens the exchange reserves, causing the price of the home currency to appreciate in terms of foreign currency.

The correct answer is 1, 2 and 4 only.

Key Points

• The Consumer Protection Act, 2019:
  • The Consumer Protection Act, 2019 (CPA-2019), which has replaced the Consumer Protection Act, 1986, aims to be more holistic and stringent in protecting the interest of the consumers and to establish authorities for timely and effective administration and settlement of the consumers' disputes. To achieve the aforesaid purpose, the CPA-2019 establishes the following:
  • The Central Consumer Protection Authority (CCPA), referred to as the Central Authority. Hence, statement 1 is correct.
  • The Central Consumer Protection Council, at the national, state, and district levels, is referred to as the National, State, and District Commissions. Hence, statement 2 is correct.
  • The Consumer Disputes Redressal Commission, at the national, state, and district levels. Hence, statement 4 is correct.
  • The Consumer Mediation Cell, to be attached to each of the District Commissions and the State Commissions. Hence, statement 3 is incorrect.

Turnover of stock or Inventory turnover indicates how many times a company goods are sold during a given period of time like a week, a month, or a year.

Key Points

Turnover of stock can be high or low:

• Low turnover of stock: When fewer goods are sold at a particular point of time and more than required investment is done on inventory then it is said that there is a low turnover of stock or it is also known as overstocking.
• High turnover of stock: When more goods are sold and there an inefficient amount of stock left for sale then it is said that there is a high turnover of stock or it is also known as understocking.

Therefore, low turnover of stock indicates more than requires investment in inventory.

Additional Information

1) Monopoly situation:

• A market situation where there is only one seller who is selling a unique product whose substitute is not easily available is known as a monopoly situation.
• The turnover of stock is high in this type of market.

2) Solvency position:

• Solvency refers to the long-term financial stability of a firm.
• The company is considered a solvent when the current ratio is greater than 1:1.

3) Lack of understanding of market situations will lead to several problems in today's era which will lead to overall low performance and inefficiency of the company.

The correct answer is IRDAI.

Key Points

• IRDAI provided insurers with more flexibility in paying commission by linking limits to the overall portfolio and company management expenses.
• The utmost commission sanctioned for non-life products has been fixed at 20% of the gross written premium in that financial year.
• Commission and remuneration payout will be based on a board-approved policy which will be reviewed on a yearly basis.

Additional Information

• IRDAI is an autonomous, statutory body tasked with regulating and promoting the insurance and re-insurance industries in India.
• Headquarters - Hyderabad.

Therefore, an opinion leader is a person who offers informal advice or information about a specific product or product category.

The correct answer is 10,000

Key PointsSection 80CCC of Income Tax Act, 1961.

Important Points Deduction can be claimed only in the year the amount has been paid.

The correct answer is Assertion (A) is False, but Reason (R) is True.

Important Points Assertion (A): Considering the ineffectiveness of the ongoing schemes i.e., Advance Authorisation, EPCG etc. under FTP 2015-20, they have been scrapped under FTP 2023.

• The FTP 2023 has scrapped the AAS and the EPCG schemes, but it has also said that these schemes will be continued along with substantial process re-engineering and technological enablement for facilitating the exporters.
• The government has said that it will continue these schemes because they have been effective in promoting exports.
• The government has also said that it will make these schemes more efficient by streamlining the approval process and making it easier for exporters to avail of the benefits.
• The government has mentioned that it will invest in technology to make the export process easier and more efficient.
• The government has informed that it will develop a single-window system for exporters, which will allow them to access all the information and services they need to export their products.

Hence, Assertion is false.

Reason: Duty exemption schemes for export production will now be implemented through Regional Offices in a rule-based IT system environment, eliminating the need for manual interface.

• The FTP 2023 has made it clear that duty exemption schemes for export production will now be implemented through Regional Offices in a rule-based IT system environment, eliminating the need for manual interface.
• This means that exporters will no longer need to apply for duty exemption schemes through the Central Government.
• Instead, they will be able to apply for these schemes through their Regional Offices.
• The application process will be fully automated, and exporters will be able to track the status of their applications online.
• The government has said that this change will make it easier for exporters to avail of duty exemption schemes and will help to reduce the time and cost involved in the application process.

Hence, Reason is true.

Therefore, the correct answer is Assertion (A) is False, but Reason (R) is True.

The correct answer is programmed. 

Key Points

• Programmed decisions tend to be well structured, routine and repetitive, occurring on a regular basis.
• They are usually made at lower levels in the organisation, have short-term consequences and are based on readily available information.
• Due to the fact that the organisation is frequently presented with the decision, a decision rule can be developed that tells the organisation or decision maker which alternative to choose once the information is available.
• The decision rule ensures that a definite method for obtaining a solution can be found and that the decision does not have to be treated as something new each time it occurs. Frequently simple formulae can be applied to the situation.
• Examples of programmed decisions include ordering raw materials or office supplies and calculating holiday pay, sick pay or redundancy payments. 
• Non-programmed decisions, in contrast, are new and unstructured and consequently a previously established decision rule cannot be applied.
• In other words, the organisation has no established procedures or records for dealing with the decision, which can therefore appear to be highly complex.
• Non-programmed decisions tend to occur at higher levels in the organisation, have long-term consequences and require a degree of judgement and creativity.
•  Examples of non-programmed decisions include the decision to try an unproven technology or to expand into a previously unknown market. 

The correct answer is Insurance Regulatory and Development Authority

Snowballl sampling is not an example of probability sampling.

Snowball Sampling is also called network or chain referral sampling.

• To start with, the researcher identifies a small number of respondents having a set of characteristics of interest to the researcher.
• After collecting the required data from those respondents, the same respondents are asked to identify others having the same characteristics set.
• E.g., collecting data from drug addicts, rape victims, etc.

5 percent is the rate of tax deduction at source from insurance commission in case of 'Person'.

Insurance can go a long way when it comes to mitigating the financial crunch caused due to medical emergencies. Therefore, it is advisable to take an insurance policy not only for oneself but for one’s dependents as well. Most times people choose their insurance via agents, brokers, etc. In such cases, the insurance commission or any other remuneration/reward received by such agents, brokers, etc., are subjected to Tax Deducted at Source (TDS) as dictated under Section 194D of the Income Tax Act.

Standard deviation refers to how much the values are spread out from a given set of values. It is a measure of how far each observed values are from the mean.

The four commonly used confidence intervals for a normal distribution are:

68.27% of values fall within 1 standard deviation of the mean (-1s <= X <= 1s)

90% of values fall within 1.65 standard deviations of the mean (-1.65s <= X <= 1.65s)

95% of values fall within 1.96 standard deviations of the mean (-1.96s <= X <= 1.96s)

99.73% of values fall within 2.58 standard deviations of the mean (-2.58s <= X <= 2.58s)

Pension is a retirement benefit and it is taxed as salary in the hands of an employee. Family pension is taxable under the head "Income from other sources" u/s 57(ii) a standard deduction shall be allowed to the legal heir @33.33% of such pension or Rs. 15,000, whichever is less.

The person who receives the family pension was not an employee but the dependent of the employee. People eligible for pension/family pension are the person himself, his/her spouse, children below 25 years of age, and unmarried daughter.

Therefore, statement (A) is incorrect and (R) is correct.

If goodwill and its full value, raised in the book of a partnership firm at the time of retirement of a partner, is to be written off, then the capital accounts of the remaining partners are debited in the old profit and loss sharing ratio.

The correct answer is The errors in the value of y are identical in successive observations.

Key Points

Linear regression is an analysis that examines whether one or more predictor variables explain the dependent variable (criterion).

Linearity: The relationship between X and the mean of Y is linear.

Homoscedasticity: the variance of the residuals is the same for each value of X.

Independence: The observations are independent of each other.
Normality: For any fixed value of X, Y is normally distributed

The set of expected values of the dependent variable y for given values of the independent variable x is normally distributed.

The standard deviation and variance of the expected values of the dependent variable around the regression line are constant for all values of the independent variable x for the set of observations in a sample.

The dependent variable y is a continuous random variable.

Important Points

Simple linear regression is used to estimate the relationship between two quantitative variables like (heights of girls and boys, and runs of two different players). We can use simple linear regression if you want to know something like how strong the relationship is between two variables (e.g., the relationship between precipitation and soil erosion).
The value of the dependent variable gives a certain value of the independent variable (e.g., the amount of soil erosion given a certain amount of precipitation).

Section 114 (2) of Companies Act, 2013:

A resolution shall be a special resolution when—

• the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution.
• the notice required under this Act has been duly given; and
• the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.

Important Points

As per Companies Act 2013, a special resolution needs to be passed in the following instances:

• Alteration of the memorandum of association or articles of association of a company.
• Change of the company's name.
• Conversion of a public company into a private company or vice versa.
• Issuance of shares with differential voting rights.
• Reduction of share capital of a company.
• Merger or amalgamation of a company with another company.
• Voluntary winding up of a company.
• Appointment of a director who is not a retiring director.
• Removal of a director before the expiry of their term.
• Appointment of an auditor other than the retiring auditor.
• Approval of a scheme of arrangement or reconstruction.
• Issuance of debentures with an option to convert them into shares.
• Approval of related party transactions.

Hence, Section 114 (2) describes 'special resolution" as per Companies Act, 2013.

The correct answer is AI Ethicist.

Key Points

As per the passage:

It’s mentioned in the passage that "It has also given birth to the occupation of AI ethicists," signifying the origin of a new job role concurrent with the rise of AI developments.

The correct answer is b, c, a, d.

Key Points

As per the passage:

The passage doesn't explicitly relay this sequence. However, logical deduction considering the evolution of AI first leads to job displacement, which in turn necessitates adept professionals (AI specialists), followed by the realization for ethical regulations (AI Ethicists), and finally, a stage of human roles being complemented by AI in non-repetitive tasks.

The correctly matched pairs are given below-

Task - Preparing forms

Element - Signing paycheques

Duty - Payroll processing

Position - Compensation policy administrator

Job - Compensation design manager

Occupation - Compensation specialist

For example, when a person is guilty of a crime or when an applicant who can be successful on the job is rejected, these are false negatives.

The correct combination is a - (iii), b - (iv), c - (i), d - (ii).

Matching principle is the accounting principle that requires that the expenses incurred during a period be recorded in the same period in which the related revenues are earned. This principle recognizes that businesses must incur expenses to earn revenues.

Materiality is a concept in accounting which states that firm can ignore small information which does not have any significant impact on the business. This also means that a business must include all other information in its financial statements which is material/significant enough.

The principle of conservatism in accounting gives guidance when recording cases of uncertainty or estimates. In other words, you should always lean towards the most conservative side of any transaction.

The cost principle is an accounting principle that requires assets, liabilities, and equity investments to be recorded on financial records at their original cost.