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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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