11th Economics - Book Back Answers - Unit 6 - English Medium Guides

  

 


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    Tamil Nadu Board 11th Standard Economics - Unit 6 : Book Back Answers and Solutions

        This post covers the book back answers and solutions for Unit 6 – Economics from the Tamil Nadu State Board 11th Standard textbook. These detailed answers have been carefully prepared by our expert teachers at KalviTips.com.

        We have explained each answer in a simple, easy-to-understand format, highlighting important points step by step under the relevant subtopics. Students are advised to read and memorize these subtopics thoroughly. Once you understand the main concepts, you’ll be able to connect other related points with real-life examples and confidently present them in your tests and exams.

        By going through this material, you’ll gain a strong understanding of Economics Unit 6 along with the corresponding book back questions and answers (PDF format).

    Question Types Covered:

    • 1 Mark Questions: Choose the correct answer, Fill in the blanks, Identify the correct statement, Match the following 
    • 2 Mark Questions: Answer briefly 
    • 3, 4, and 5 Mark Questions: Answer in detail

    All answers are presented in a clear and student-friendly manner, focusing on key points to help you score full marks.

    All the best, Class 11 students! Prepare well and aim for top scores. Thank you!

    Unit 6: Distribution Analysis


    I. Multiple Choice questions.

    1. In Economics, distribution of income is among the
    a. factors of production
    b. individual
    c. firms
    d. traders 
    Answer key: 
    a. factors of production
     
    2. Theory of distribution is popularly known as,
    a. Theory of product-pricing
    b. Theory of factor-pricing
    c. Theory of wages
    d. Theory of Interest
    Answer key:
    b. Theory of factor-pricing  
     
    3. Rent is the reward for the use of
    a. capital
    b. labour
    c. land
    d. organization
    Answer key: 
    c. land  
     
    4. The concept of ‘Quasi-Rent’ is associated with
    a. Ricardo
    b. Keynes
    c. Walker
    d. Marshall
    Answer key: 
    d. Marshall  
     
    5. The Classical Theory of Rent was propounded by
    a. Ricardo
    b. Keynes
    c. Marshall
    d. Walker
    Answer key: 
    a. Ricardo  
     
    6. ‘Original and indestructible powers of the soil’ is the term used by
    a. J.S.Mill
    b. Walker
    c. Clark
    d. Ricardo
    Answer key: 
    d. Ricardo  
     
    7. The reward for labour is
    a. rent
    b. wage
    c. profit
    d. interest
    Answer key: 
    b. wage  
     
    8. Money wages are also known as
    a. real wages
    b. nominal wages
    c. original wages
    d. transfer wages
    Answer key: 
    b. nominal wages  
     
    9. Residual Claimant Theory is propounded by
    a. Keynes
    b. Walker
    c. Hawley
    d. Knight
    Answer key:
    b. Walker  
     
    10. The reward given for the use of capital
    a. rent
    b. wage
    c. interest
    d. profit
    Answer key: 
    c. interest  
     
    11. Keynesian Theory of interest is popularly known as
    a. Abstinence Theory
    b. Liquidity Preference Theory
    c. Loanable Funds Theory
    d. Agio Theory
    Answer key: 
    b. Liquidity Preference Theory 
     
    12. According to the Loanable Funds Theory, supply of loanable funds is equal to
    a. S + BC + DH + DI
    b. I + DS + DH + BM
    c. S + DS + BM + DI
    d. S + BM + DH + DS
    Answer key: 
    a. S + BC + DH + DI  
     
    13. The concept of meeting unexpected expenditure according to Keynes is
    a. Transaction motive
    b. Precautionary motive
    c. Speculative motive
    d. Personal motive
    Answer key: 
     
     
    14. The distribution of income or wealth of a country among the individuals are
    a. functional distribution
    b. personal distribution
    c. goods distribution
    d. services distribution
    Answer key: 
    b. Precautionary motive  
     
    15. Profit is the reward for
    a. land
    b. organization
    c. capital
    d. labour
    Answer key: 
    b. organization  
     
    16. Innovation Theory of profit was given by
    a. Hawley
    b. Schumpeter
    c. Keynes
    d. Knight
    Answer key: 
    b. Schumpeter  
     
    17. Quasi-rent arises in
    a. Man-made appliances
    b. Homemade items
    c. Imported items
    d. None of these
    Answer key:
    a. Man-made appliances  
     
    18. “Wages as a sum of money are paid under contract by an employer to a worker for services rendered” – Who said this?
    a. Benham
    b. Marshall
    c. Walker
    d. J.S.Mill
    Answer key: 
    a. Benham 
     
    19. Abstinence Theory of Interest was propounded by
    a. Alfred Marshall
    b. N.W Senior
    c. Bohm-Bawerk
    d. Knut Wicksell
    Answer key: 
    b. N.W Senior  
     
    20. Loanable Funds Theory of Interest is called as
    a. Classical Theory
    b. Modern Theory
    c. Traditional Theory
    d. Neo-Classical Theory
    Answer key: 
    d. Neo-Classical Theory 
     

    II. Answer the following questions in one or two sentences.

    21. What is meant by distribution?
    Distribution means division of income among the four factors of production.
    Distribution is given in terms of rent to landlords, wage to labour, interest to capital and profit to
    entrepreneurs.
     
    22. Mention the types of distribution.
    1. Personal Distribution: Personal Distribution is the distribution of national income among the
    individuals.
    2. Functional Distribution: Functional Distribution means the distribution of income among the four
    factors of production.
     
    23. Define ‘Rent’.
    According David Ricardo, Rent is that portion of the produce of the earth which is paid to the
    landlord for the use of the original and indestructible powers of the soil”.
     
    24. Distinguish between real and money wages.
    Money / Nominal Wages
    Real Wages
    Money wages are referred to the wages paid in terms of money.
    Real wages are the wages paid in terms ofgoods and services
    Example: Money received by a worker per unit of time or quantum of work etc.,
    Example: Real Wages = Money Wages – Effect of inflation on the purchasing power.
    S.NO Money / Nominal Wages Real Wages
    1 Money wages are referred to the wages
    paid in terms of money.
    Real wages are the wages paid in terms ofgoods
    and services.
    2 Example: Money received by a worker per
    unit of time or quantum of work etc.,
    Example: Real Wages = Money Wages – Effect
    of inflation on the purchasing power.
     
    25. What do you mean by interest?
    According Alfred Marshall,“ Interest is the price paid for the use of capital in any market”
    Interest is the reward paid by the borrower to the lender for the use of capital.
     
    26. What is profit?
    Profit is a return to the entrepreneur for the use of his entrepreneurial ability.
    It is the net income of the organizer.
     
    27. State the meaning of liquidity preference.
    Liquidity preference means the preference of the people to hold wealth in the form of liquid cash other
    than bonds, securities, gold and etc.,.

    III. Answer the following questions in one paragraph.

    28. What are the motives of demand for money?
    The Transaction Motive The transaction motive relates to the desire of the people to hold cash for
    the current transactions. Mt = f (y)
    The Precautionary Motive The precautionary motive relates to the desire of the people to hold
    cash to meet unexpected or unforeseen expenditures. Mp = f (y)
    The Speculative Motive The speculative motive relates to the desire of the people to hold cash in
    order to take advantage of market movements. Ms = f (i).
     
    29. List out the kinds of wages.
    Nominal Wages or Money Wages: Nominal wages are referred to the wages paid in terms of money.
    Real Wages: Real wages are the wages paid in terms of goods and services.
    Piece Wages: Wages that are paid on the basis of quantum of work done.
    Time Wages: Wages that are paid on the basis of the amount of time.

    30. Distinguish between rent and quasi-rent.

    RENT
    QUASI-RENT
    Rent accrues to land
    Quasi-rent accrues to manmade appliances.
    The supply of land is fixed forever.

    The supply of manmade appliances is fixed for a

    short period only.
    It enters into price
    It does not enter into price
      
    31. Briefly explain the Subsistence Theory of Wages.
    1. According to this theory,wage must be equal to the subsistence level of the labourer and his family
    2. Subsistence means the minimum amount of food, clothing and shelter which workers and their
    family require for existence.
    3. If workers are paid higher wages than the subsistence level, the workers would be better off and
    they will have large families.

     

    32. State the Dynamic Theory of Profit.
    According to J.B Clark profit is the reward for dynamic changes in society. Profit cannot arise in a
    static (unchanged) society.
    w Population is increasing
    w Volume of Capital is increasing.
    w Methods of production are improving.
    w Forms of industrial organization are changing.
    w The wants of consumer are multiplying.
     
    33. Describe briefly the Innovation Theory of Profit.
    According Schumpeter profit is the reward for “innovation”. Innovation means invention put into
    commercial practice. An innovation may consist of the following:
    X Introduction of a new product.

    X Introduction of a new method of production.

    X Opening up of a new market.
    X Discovery of new raw materials
    X Reorganization of an industry / firm.
     
    34. Write a note on Risk bearing theory of profit
    According to Hawley profit is the reward for “risk taking” in business. Risk taking is an essential
    function of the entrepreneur and is the basis of profit.
    1. Since the entrepreneur undertakes the risks, he receives profits.
    2. If the entrepreneur does not receive the reward, he will not be prepared to undertake the risks.
    Thus, higher the risks, the greater are the profit.
    3. It is the profit that induces the entrepreneurs to undertake such risks.

    IV. Answer the following questions in about a page.

    35. Explain the Marginal Productivity Theory of Distribution.
    Meaning
    According to the Marginal Productivity Theory of Distribution, the price or the reward for any
    factor of production is equal to the marginal productivity of that factor. In short, each factor is rewarded
    according to its marginal productivity.
    Assumption
    1. All the factors of production are homogenous.
    2. Factors of production can be substituted for each other.
    3. There is perfect competition both in the factor market and product market.
    4. There is perfect mobility of factors of production.
    Marginal Product
    The Marginal product of a factor of production means the addition made to the total product by
    employment of an additional unit of that factor. The Marginal Product may be expressed as MPP, VMP
    and MRP.
    Marginal Physical Product (MPP)
    Value of Marginal Product = VMP = MPP x Price Marginal Revenue Product MRP = MPP x MR
    MP :Under Perfect Competition

    1. When there is perfect competition in the factor market,
    the firm is in equilibrium (i.e., earning maximum profits) only when MFC = MRP.
    2. Hence, in the diagram, the firm reaches equilibrium at point Q by employing ON units of factors
    and paying OP price (NQ) where MFC = MRP.
    At the point Q, MRP = ARP.
    3. The price paid to the factor (NQ) is also equal to
    marginal revenue product (NQ) and average revenue
    product (NQ).
    Under Imperfect Competition

    1. Under imperfect competition, At the point Q,
    MFC = MRP, where the employer attains his
    maximum profit and so he stops employment
    of the factors at the point.
    2. The total exploitation of factor by the employer is
    RQ X SR = “PQRS” (shaded area).
    3. Thus, under imperfect competition, factor is
    exploited at the equilibrium position.
     
    36. Illustrate the Ricardian Theory of Rent.
    Definition
    According to Ricardo,“Rent is that portion of the produce of the earth which is paid to the
    landlord for the use of the original and indestructible powers of the soil”.
    Assumption
    1. Land differs in fertility.
    2. The law of diminishing returns operates in agriculture.
    3. Rent depends upon fertility and location of land.
    4. Theory assumes perfect competition.
     
    Schedule of Ricardian Theory of Rent
    Grades oflands
    Production
    Surplus 
    A
    40
    40-20=20
    B
    30
    30-20=10
    C
    20
    20-20=0

    Explanation

    1. In diagram, X axis represents various grades of land and Y axis represents yield per acre (in

    bags).

    2. OA, AB and BC are the ‘A’ grade, ‘B’ grade and ‘C’ grade lands respectively.

    3. The application of equal amount of labour and capital on each of them gives a yield represented

    by the rectangles standing just above the respective bases.

    4. The ‘C’ grade land is the “no–rent land” ‘A’ and ‘B’ grade lands are “intra – marginal lands”.

     

    37. Elucidate the Loanable Funds Theory of Interest.

    Definition

    According to Loanable Funds theory, The rate of interest is determined by the equilibrium between

    demand for and supply of loanable funds in the credit market.

    Demand for Loanable Funds

    1. Demand for Investment (I)

    2. Demand for Consumption (C)

    3. Demand for Hoarding (H)

    Supply of Loanable Funds

    1. Savings (S)

    2. Bank Credit (BC)

    3. Dishoarding (DH)

    4. Disinvestment(DI)

    Ø The Loanable Funds Theory, also known as the “Neo–Classical Theory”,

    Equilibrium

    The rate of interest is determined by the equilibrium between the total demand for and the total

    supply of loanable funds.

    Supply of loanable funds = S + BC + DH + DI Demand for loanable funds = I + C + H

    E = S + BC + DH + DI = I + C + H

    1. In Diagram, X axis represents the demand for and supply

    of loanable funds and Y axis represents the rate of interest.

    2. The LD and LS curves, intersect each other at the point

    “E”the equilibrium point. At this point, OR rate of interest

    and OM is the amount of loanable funds.

    Criticisms

    1.The loanable funds theory is “indeterminate”’ unless the

    income level is already known.

    2. Difficult to combine real factors like savings and investment

    with monetary factors like bank credit

     

    38. Explain the Keynesian Theory of Interest.

    Meaning

    Liquidity preference means the preference of the people to hold wealth in the form of liquid cash

    rather than in other non- liquid assets like bonds, securities, bills of exchange, land, building, gold etc.

    Motives of Demand for Money

    1. The Transaction Motive

    The desire of the people to hold cash for the current transactions (day–to- day expenses)Mt = f (y)

    2. The Precautionary Motive

    Desire of the people to hold cash to meet unexpected or unforeseen expenditures (sickness,

    accidents).Mp = f (y)

    3. The Speculative Motive

    The speculative motive relates to the desire of the people

    to hold cash in order to take advantage of market movements

    regarding the future. Ms = f (i)

     

    Equilibrium between Demand and Supply of Money

    © The rate of interest is determined by the demand for money

    and the supply of money.

    © If liquidity preference increases from LP to L1P1 the supply

    of money remains constant,

    © The rate of interest would increase from OI to OI1.

    © The supply of money remains constants.

    © Total demand for money=Mt+Mp+Ms

    Demand for money=supply of money at equilibrium point ;

    Equilibrium Point 1 = E = LP = M2 = I = Rate of Interest ... (1)

    Equilibrium Point2 = E1 = L1P1 = M2 = I1 = Rate of Interest ... (2)

     





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