CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS1) The first question is a compulsory 10 marks question, taken from May June 2002 past paper (General).Question1. It involves Economic Systems and Government Control of Business Activity.(a) List TWO types of economic systems. (2mks)(b) Explain the differences between the types of economic systems listed in (a) above. (4mks)(c) Suggest two ways by which the government of your country can control business activity. (4mks)Total 10 marksBefore reading the discussion and guidelines to answering the question, you may wish to plan an answerthat you would give to the question. Remember, there may be other possible answers than the onessuggested.DISCUSSION AND GUIDELINES(a) Any two types of economic systems can be listed, for example, the free economic system and theplanned economic system. This part of the question does not require any expansion or explanation.(b) The characteristics or features of the economic systems listed can be used to show the differencesbetween them.Conjunctions such as whereas, on the other hand, while and however should be used to indicate yourreference to the opposite feature for the other economic system. For example, in the free economy, mostof the scarce resources are owned and allocated by private individuals and firms while in the plannedeconomy, scarce resources are owned and allocated by the government.The marks allotted for this part of the question would indicate that a minimum of two differences isrequired.(c) Governments’ control of business activity can come in many forms including:* Legislation The passing of laws that businesses should abide by.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS* Price controls Government stated maximum prices for selected goods and services* Nationalisation Direct ownership and control of industries by the Government, for example, wheremonopolies are exploiting consumers.* Increased taxation To reduce monopoly profits.Registration and other legal requirements for setting up of businesses.* Employment of inspectors to monitor the affairs of businesses e.g. price inspectors and sanitaryinspectors.* Setting up of government agencies such as The Bureau of Standards to monitor the quality of goodsproduced and imported.Remember, you are asked to suggest only two ways.2) Now let’s move on to another question. CXC past paper May/June 2003 (General), Question 1.(a) List TWO functions of a business. (2 marks)(b) Briefly describe TWO of the following types of business organisations:(i) Partnership(ii) Public Limited Company(iii) Co-operative (4 marks)(c) State TWO advantages which the Public Limited Company has over the Partnership type of business. (4marks)Total 10 marks.DISCUSSION AND GUIDELINE ANSWER(a) Any TWO functions of a business can be listed e.g.to sell goods and services to satisfy people’s wantsand to provide employment for people. Expansion on and explanation of the functions is not required.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(b) The TWO types of businesses can be described by defining them and /or outlining their features orcharacteristics. For e.g. in describing the partnership one might say that a partnership is formed with twoto 20 members who pool their resources together to run a business with a view to making a profit.Partnerships are normally required to sign a Deed of Partnership and register with the Registrar ofCompanies.(c) The advantages which the Public Limited Company has over the Partnership type of business includesthe fact that:* A larger number of part owners, since the Public Limited Company has a minimum of seven shareholdersand no maximum.* More capital can be raised than in a partnership since an appeal can be made to the general publicthrough the Stock Exchange.* The Public Limited Company is a separate entity from the shareholder owners, therefore, the individualshareholders cannot be sued, the company must be sued.* The Public Limited Company has a Board of Directors elected by the shareholders.* These companies may enjoy economies of scale.* Risk is spread over many shareholders.Remember, you are asked to state only TWO advantages of the Public Limited Company over thePartnership.3) CXC past paper May/June 2003 (General) Question 5.The following information appeared in a daily newspaper.Property Services, No. 56 Newpark SaletownPublic Auction SaleOn January 25, 2002 at 10:00 a.m.I will offer for sale on the date and at the place mentioned above the following vehicle: One l999 Toyota
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESSMini BusTerms of Sale: Strictly cash on the fall of the hammer. Vehicle on view on the morning of the sale. Vehicle will be sold as is where is.- John Brown, Auctioneer.Tom Phillip who lived 20 miles away, drove to the address on the date specified with the intention ofpurchasing the minibus.On arrival, he was told by the auctioneer that the minibus was no longer available and was removed fromthe items to be auctioned.Tom Phillip became furious, threatened to sue for breach of contract and demanded a refund of histraveling expenses(a) Define the term ‘contract’. (2 marks) (b) (i) By attending the public auctionsale, did Tom Phillip accept a firm offer? (1 mark)(ii) Give ONE reason for your answer in (b)(i) above (2marks)(c) What do you understand by ‘vehicle will be sold as is where is’? (2 marks)(d) (i) Define the term ‘breach of contract’. (2 marks)(ii) State ONE way in which a court may settle a breach of contract.(1 mark)(e) State TWO ways by which a contract can be terminated or discharged (4 marks)(f) (i) Should John Brown refund Tom Phillip’s traveling expenses? (1mark)(ii) Give ONE reason for your answer to (f)(i) above. (2 marks)(g) (i) Advise Tom Phillip whether he will succeed in court against John Brown. (1 mark)
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(ii) Give ONE reason for your advice in (g)(i) above. (2 marks)Total 20 marksDISCUSSION AND GUIDELINE ANSWER* (a) You must be careful to define a contract, and not an agreement. A contract is defined as a legallybinding agreement or an agreement that is created with legal intentions.If you state that a contract is an agreement without stating any legal aspect, you may only score half of themarks, since all contracts are agreements, but not all agreements are contracts.* (b) (i) The answer to this part of the question is simply NO.(ii) The vehicle was not offered for sale, therefore, one cannot accept an offer that was not made. Anacceptance MUST be to a firm offer.* (c) This means that the vehicle is to be sold in the condition that it is presently in at the place or physicallocality that it is at.(d) (i) Breach of contract means that a party or parties to the contract fail to keep their part or parts to thecontract.(ii) The court can rule that the party that has breached the contract be forced to abide by their side of thecontract. Or, with the injured parties agreement, the existing contract can be terminated and a new onecan come into existence that satisfies all parties.* (e) There are a number of ways in which a contract can be discharged or terminated. You are asked tostate TWO ways. Some ways are suggested below:* By death of either party to the contract* By bankruptcy, which must be proven in the legal sense.* By frustration, which means that something, which was possible at the time the contract was made, nowbecomes impossible .
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS* The agreed time for the contract to elapse has passed.* By agreement of all concerned parties* By breach. However, in this case the contract can only be terminated with the permission of the injuredparty.* By law. This is when something that was legal at the time the contract was made now becomes illegal bylaw. Therefore, the contract must come to an end.* (f) (i) No, John Brown should not refund Tom Phillip?s traveling expenses.(ii) There was no contract and no breach of contract.Tom Phillip took it upon himself to make the journey to the auction and so the cost of doing so must fallon his own shoulders(g) (i) Tom Phillip will NOT succeed in court against John Brown.(ii) There was no contract and there was no breach of contract. He would win the case if an existingcontract had been breached.4) CXC past paper May/June 2004 (General) question 4.Tasty Fruit Ltd. is a manufacturer of several types of exotic tropical fruit juices. Without consultation, Mr.Albert, the general manager, took a decision that with immediate effect all breaks would be reduced from15 minutes to five minutes. He claimed that the change became necessary to enable the factory to processa larger amount of fruit juices daily.(a) What type of leadership style did Mr. Albert appear to be practising? (2 marks)(b) (i) Name TWO other leadership styles. (2 marks)(ii) Describe ONE of the leadership styles you named in (b)(i) above. (2 marks)(c) Identify TWO situations that can result from the action taken by Mr. Albert. (4 marks)
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(d) (i) State FIVE qualities of a good manager. (5 marks).(ii) Give an example to show how lack of one of the qualities you mentioned at (d)(i) above can affect theoperation of the factory. (2 marks)(e) State THREE responsibilities of management to its employees. (3 marks)Total 20 marksDISCUSSION AND GUIDELINE ANSWER(a) Autocratic/Authoritarian leadership style.(b) (i) Any TWO of the following can be named: laissez-faire/free reign leadership style, democraticleadership style, charismatic leadership style.(ii) Laissez-faire individuals are given the broad outlines, but left on their own to carry out the majoraspects of the decisions.Democratic those who will be affected by the decision are consulted before the decision is taken, thoughthe leader still reserves the right to make the final decision.Charismatic the leader leads by virtue of his/her personality or charisma. Any ONE of the leadership stylescan be described.(c) The following situations may result: poor management-worker relationship; industrial action may betaken by workers; resignations by workers; workers may become discontented; poor self-esteem ofworkers and reduced productivity of workers. Any TWO situations may be used.(d) (i) The qualities of a good manager include: honesty, flexibility, ability to carry out managementfunctions and responsibilities, show genuine concern for employees and customers, ability to motivateworkers, be adaptable to various situations, able to work on own initiative, ability to use ManagementInformation Systems, be aggressive, but not too aggressive, be reliable etc.(ii) If for example the manager is unable to motivate his employees, they will become lax and productivitywill fall. The business will end up loosing profits.The negative effects of the lack of any of the qualities you listed in (d)(i) can be explained.(e) Responsibilities of managers to employees include: to treat them fairly, to give them safe, cleanenvironment to work in, to allow them the freedom to join trade unions, to support their desires to be
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESSeducated and trained, to pay fair wages and salaries, to honour leave entitlement, to give adequatecompensation for injury on the job etc. Any THREE responsibilities can be stated.5) CXC past paper January 2005, (General) question 5.Recently, the employees of the telephone company have engaged in various industrial activities in supportof their trade union. The trade union was involved in ‘collective bargaining’ with the management of thecompany for a new three-year industrial agreement for its members. The management retaliated by takingcertain actions against the employees who charged that their rights were being violated.(a) Give FIVE examples of industrial activities which the employees could have engaged in without striking.(5 marks)(b) Identify TWO actions the management could have taken in retaliation against the industrial activities bythe workers. (2 marks)(c) Explain the term ‘collective bargaining’. (2 marks)(d) List FIVE responsibilities of the management to its employees. (5 marks)(e) Apart from ‘collective bargaining’, outline THREE other functions of a trade union. (6 marks)Total 20 marksDISCUSSION AND GUIDELINE ANSWER(a) Examples of industrial action apart from striking include: sick out, go-slow, sit-in, overtime ban, work-to-rule and boycotting the company’s products etc.(b) The action that management could have taken includes: lockouts, black-listing, suspensions,termination of work contracts, deductions of salary etc.(c) Collective bargaining refers to the trade union function in which the trade union representing theworkers and the employer or employers’ association discuss issues relating to employees with a view tosettlement which is suitable to both sides.(d) See answer (e) in previous question.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(e) Other functions of the trade union include: securing better wages and fringe benefits for workers,securing better work environment, job security, ensuring that workers get the leave they are entitled to,ensuring that workers are not exploited in any way, education of members as to the role of trade unions,scholarships to members and family etc. The THREE points chosen should be expanded on by briefexplanations and /or examples.6) Past CXC paper May/June 2002, (General) question 7.Many governments throughout the Caribbean region have been encouraging persons to becomeentrepreneurs.(a) What do you understand by the term ‘entrepreneur’? (2 marks)(b) Suggest THREE reasons why entrepreneurship is being encouraged in yourcountry. (3 marks)(c) List THREE characteristics of a successful entrepreneur. (3 marks)(d) Discuss TWO problems an entrepreneur may encounter. (6 marks)(e) Outline how an entrepreneur may overcome any ONE of the problems discussed in (c) above. (2 marks)(f) List FOUR ways in which governments may assist entrepreneurs. (4 marks)Total 20 marksDISCUSSION AND GUIDELINE ANSWER(a) The entrepreneur is a human factor of production that is responsible for organising the other factors ofproduction and bearing the risks in production.(b) Among the reasons why entrepreneurship is being encouraged are: entrepreneurship providesopportunity for self employment, it also reduces unemployment, it increases the production of goods andservices, increases the variety of goods and services produced, Gross National Product is increased, makesuse of idle skills, and uses up local raw materials. Any THREE reasons may be suggested.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(c) The characteristics of a successful entrepreneur are many and varied. They include: ability to workhard, ability to take calculated risks, ability to make effective decisions, ability to organise, ability tomotivate and the ability to think quickly and clearly in any situation. Again, any THREE characteristics maybe listed.(d) The problems of the entrepreneur include: problems in sourcing capital, lack of managerial skills, lackof suitable collateral, inability to assess market potential, inability to evaluate competition, lack ofappropriate technology and the inability to procure suitable machinery and equipment.You should expandon the TWO problems you choose to discuss by explaining them and giving examples.(e) You should begin this part of your answer by stating the problem selected and then outline yoursuggestion for overcoming the problem. For example, if you select the problem of the difficulty insourcing capital, you could suggest that the entrepreneur explore several sources of capital and that heeven combine different sources of capital, such as his own savings, along with a loan from a bank or creditunion.(f) The ways in which governments can assist entrepreneurs include: providing them with ‘soft loans’(loans with little or no interest), providing education and training on enterprise management, giving taxincentives, providing entrepreneurial consultants to monitor and assist entrepreneurs, providing factoryshells for them to operate their businesses in, and providing markets for their goods and services. AnyFOUR ways can be listed.7) CXC past paper January 2001,( General), question 2.For many years, persons from Caribbean territories have migrated to Europe and North America. Veryoften these persons only return for holidays or upon retirement.(a) Explain what is meant by migration. (2 marks).(b) State THREE negative effects of migration on the labour force in your country.(3 marks).(c) Explain TWO positive effects migration may have on your country (4 marks).(d) Identify ONE measure your country uses to encourage nationals to return.(1 mark).
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESSTotal 10 marksDISCUSSION AND GUIDELINE ANSWER(a) Migration refers to the permanent movement of people from one area to another within a country(internal movement), or from one country to another (external movement) for at least one year. Thecorrect time period of the movement must be included in your explanation in order to obtain full marks.(b) The negative effects of internal or external migration or both may be given. Internally, the negativeeffects of migration include: shortage of labour in one area and surplus of labour in another area,overpopulation in one area with resulting social disorders, e.g., crime, etc. External migration results innegative effects such as ‘the brain drain’, families abandoned and left to fend for themselves by migrants,lower standard of living, etc. Any three negative effects will be accepted.(c) Migration can have positive effects on a country.This is especially true of external migration which reduces the strain on the government, in cases wherethe migrants were previously unemployed. Also, many of these migrants return years later and contributepositively to their countries through skills learnt in other countries and/or through money they bring back.The points brought out must be explained accurately in order to score full marks.(d) Governments may encourage nationals to return by offering attractive and affordable housing, jobs forthose who require them, by allowing them to return with their personal effects without having to payduties, or only requiring them to pay small amounts of duty, by ensuring that their country is as close tocrime-free as possible, etc. Any one measure properly stated will be accepted.8) CXC January 2000 paper (General) , question 6.Rapid structural change is being experienced throughout the world, bringing with it a growing importanceof the contribution of small firms/businesses to economic development in every country. Many industriesand firms are now buying and selling goods via the computer through a system called the Internet.(a) Define the term small business. (2 marks).(b) Given the following sectors in the Caribbean, indicate which FOUR are most likely to be dominated bysmall businesses:(i) bauxite production
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(ii) retailing(iii) agriculture(iv) petroleum refining(v) finance and banking(vi) personal services(vii) fishing. (4 marks).(c) Discuss FOUR ways through which small businesspersons can use the Internet to assist them in theirbusiness goals. (8 marks).(d) Suggest THREE reasons why the government of your country should encourage the growth of smallbusinesses as a way to promote economic development. (6 marks).Total: 20 marksDISCUSSION AND GUIDELINE ANSWER(a) There are a number of acceptable definitions of the small firm. You may wish to use any of the threedefinitions from Trinidad and Tobago, or any other definition that you are comfortable with. The Trinidadand Tobago definitions are:* A firm whose total assets excluding land and buildings does not exceed TT$500,000.* According to The Central Statistical Office, a small business is a business that employs less than 10workers.* A firm that employs only one top manager who should manage the business and perform otherfunctional duties as well.Generally speaking, a small firm is one with virtually no middle management, i.e., there is hardly anysupervisors or subordinate managers.(b) The FOUR sectors most likely to be dominated by small businesses are retailing, agriculture, personalservices and fishing.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(c) The Internet allows small business persons to: communicate with others in the same field, getinformation and ideas that are current in their field, advertise their products, source raw materials andgoods at reasonable prices, source markets/outlets for their goods and services, get access to Internetbuying and selling which boosts sales, etc. The points must be discussed fully to show how the smallbusiness benefits from the Internet in order to gain the full eight marks.(d) Governments should encourage the growth of small businesses because:* They provide healthy competition to larger firms and force them to sell at more reasonable prices.* Small businesses reduce unemployment through employing people.* They produce goods and services that people want and this will increase standard of living.* They contribute towards GNP/National Income.* They use up natural and other idle resources.* They provide linkages to other firms so they can be certain of their sources of raw materials and/or theiroutlets.* New ideas are usually tried out in small firms.* Small firms often grow into larger successful businesses, these firms are flexible and can produce whatis required for economic development. The THREE reasons chosen must be developed properly in order togain the full six marks.9) CXC (General) paper May/June 1999, questions six and seven.Let us start with question six:a) Classify three types of productive activities. (3 mks)(b) Identify three types of productive activities that are carried out in the Caribbean and list the country inwhich each is carried out. (6 mks)(c) (i) State five factors which determine the location of an industry. (5 mks)
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(ii) Discuss three economic and social implications of technological developement.(6 mks)Total: 20 mksDISCUSSION AND GUIDELINE ANSWER(a) There are four types of productive activities: extraction, construction, manufacturing and serviceactivities. Any three of the four can be used for the answer.(b) A number of activities and countries can be used for this answer. Consider the following:Agriculture JamaicaFishing BarbadosMining GuyanaConstruction TrinidadManufacturing TrinidadTransport St. LuciaTourism JamaicaCommunication BarbadosYou should note that other activities and countries may be considered, however, you should identify threedifferent productive activities and the countries in which the activities are observed.(c) (i) The factors that influence the location of industry include: land, nearness to markets, nearness toraw materials, nearness to a suitable labour supply, nearness to power, climate, infrastructure and thegovernment.(ii) The economic and social implications of technological development include: increased output,improved standard of living or quality of life, greater speed in producing, improved quality of production,structural unemploy-ment, physical impairment and stress and alienation.Note that the points discussed can be economic or social in nature and may also be positive or negative.Each implication must be discussed, not listed, for full marks.10) Now for the second and final question for this lesson.(a) Differentiate between the terms ‘market’ and ‘marketing’. (2 mks)
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(b) List four marketing activities. (4 mks)(c) Identify four factors influencing the behaviour of consumers in their choice of local hamburgers overforeign hamburgers. (8 mks)(d) Discuss three methods a local business may use to promote local hamburgers.(6 mks)Total: 20 mksDISCUSSION AND GUIDELINE ANSWER(a) A market refers to a situation in which buyers and sellers are in contact for the purpose of buying andselling goods and services. Marketing, on the other hand, refers to everything that is done to get goodsand services to the right people at the right time and priced in the most efficient manner, while making aprofit.(b) Any four marketing activities can be listed.Included are: market research, advertising, sales promotion, branding, distribution, sales, pricing; publicrelations, research and development, marketing mix, etc.(c) Taste, tradition, quality, price, brand loyalty, income, knowledge of the owners, convenience, the waythe good is advertised, etc.(d) Methods of promotion that can be used include: advertising, sales promotions, publicity, publicrelations and competitive pricing. Each method should be discussed, e.g., advertising may increase thedemand for local hamburgers. The business will sell more and make more profit.11) CXC past paper, January 2001, General Proficiency, Question 6.This question is based on economies and diseconomies of scale and mechanisation.Company XYZ Ltd. manufactures and markets a range of candles of different shapes and lengths. Since itsincorporation in 1989, sales volume has increased tenfold. In order to meet demand, the company hashad to expand its production capacity and support systems considerably.(a) List FOUR internal economies of scale the company might experience. (4 marks)
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(b) Identify FOUR diseconomies of scale the company might experience. (4 marks)Expansion has invariably led to increased mechanisation of various aspects of a business.(c) (i) Explain FOUR benefits the company might experience because of mechanisation. (8 marks)(ii) Discuss TWO negative effects the introduction of mechanisation might have on the company. (4 marks)Total: 20 marksDISCUSSION AND GUIDELINES ANSWER(a) You will remember that economies of scale refers to advantage to a firm or company from going intolarge-scale production. The economies of scale include: Technical economies/economies in the use of factors of production. Managerial economies/economies in administration. Research and development economies. Financial economies. Marketing economies/commercial economies. Social economies. Risk-bearing economies etc.Any FOUR economies or advantage may be listed.(b) Diseconomies of scale refers to the disadvantages to a firm or company from large-scale production.The diseconomies include: Increased costs, e.g. increased marketing and financial costs. ‘Red tape’, which is the elaborate and time-consuming procedures through which consumers mustpass. Changing techniques of production may cause expensive machinery to lay idle. Larger businesses often result in loss of coordination and lack of control, e.g. communicationbetween management and workers may slow down, wastages of factors, etc.Any FOUR diseconomies or disadvantages may be listed.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(c) (i) Recall that mechanisation means partially replacing human or animal muscle power by a machine,e.g., a tailor buying a sewing machine instead of sewing by hand. The benefits of mechanisation include: Output increases because work is speeded up and more can be produced in less time. Fewer workers are needed as machines can do the work of a number of persons. Costs are saved. These costs that are saved can be transferred to the market in the form of lowerprices to consumers. The quality of output often increases. It encourages more skilled workers to enter the workforce, i.e., workers who can operate specificmachinery etc.Any FOUR benefits can be explained. For full marks, the benefits must be brought out clearly.(ii) The negative effects of the introduction of mechanisation on the company might include: Unemployment caused by the fact that less labour is required than when work is done entirely byhand, therefore, the excess labour is normally laid off. Some machines are of a technical nature and require skilled persons to operate them. In some casesthese skilled persons are hard to find. When machines are out of service, overhead cost increase. Machines may be costly to maintain, as in some cases parts may have to be imported with the useof scarce foreign exchange.As in (c) (i) above, the negative effects of mechanisation must be properly discussed in order to gain fullmarks.12) CXC past paper, January 2001, General, question 8The Caribbean island of Green Mountain is having problems with its financial institutions. Customers ofsome banks are adding to the problems as many have withdrawn their deposits from the banks. Thegovernment has asked the central bank to do all it can to prevent a collapse of the commercial bankingsector.(a) State FOUR characteristics of money. (4 marks)(b) List TWO functions or services offered by commercial banks. (2 marks)
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(c) For EACH of the functions mentioned above, explain what benefit customers obtain from using thesefunctions. (4 marks)(d) List FOUR features of central banks. (4 marks)(e) Select THREE of the features of central banks you mentioned above, and explain how they help topromote smooth operation of the banking system in your country. (6 marks)Total marks: 20DISCUSSION AND GUIDELINE ANSWER(a) You must be careful not to confuse the characteristics of money with the functions of money.The characteristics of money are the features of money. Money should be: Generally acceptable Durable or long-lasting Homogeneous Divisible into large and small units Scarce or limited in supply PortableAny FOUR characteristics may be stated.(b) The functions or services offered by commercial banks today are many and varied. They include thefollowing: Accept deposits from customers for safekeeping and makes these deposits available to customerswhen needed. Lend money to qualified customers at interest. Allow standing order payments at customers’ requests. Make the use of the cheque as a means of payment possible. Sell travellers’ cheques and buy and sell foreign currency. Give financial advice to customers. Help customers to open letters of credit.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS Act as agents in collecting dividends on behalf of their customers. Act as executors and trustees to the written wills of their customers. Allow customers use of the banks’ safety deposit boxes and night safe facilities etc.Any TWO functions or services may be listed.(c) Whichever TWO functions you choose to explain, you must ensure that you properly explain thebenefits of them to the customer. For example:The function of accepting deposits from customers benefits the customers in that it allows them to keeptheir money in a safe place instead of keeping it at home. In addition, for most deposit accounts, thecustomer earns interest on his deposits and this encourages him to save with commercial banks.Commercial banks lend money to qualified customers by opening loan accounts, by means of overdraftsand by discounting bills of exchange. Whatever the method, customers are granted loans and benefit fromlarge sums of money, which they perhaps could not save for, while they benefit in being able to pay backloans in small installments. Customers benefit in getting loans for various purposes including education,vacation and for purchasing cars and other assets.(d) The features of the central bank includes: Carrying out government’s monetary policies. Control and monitoring of commercial banks and other financial institutions. Issuing notes and coins and recalling them from circulation when necessary. Being banker to commercial banks and to the government. Negotiating on behalf of the government in international financial agreements, e.g. with the IMF,etc.Any FOUR features may be listed.(e) Again, in explaining the THREE chosen features, you must be careful to show how they promotesmooth operations of the banking system. For example, in monitoring the commercial banks and otherfinancial institutions, the central bank ensures that governments’ monetary policies are carried out andthat they are not promoting the opposite policy which would cause chaos in the financial system and inthe country. You must explain THREE features in like manner.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS13) CXC past paper, May/June 2005, general, question 9The question, reproduced below, surrounds the topic of international trade and balance of payments:The following information was taken from the final accounts of Tropicalo, a country in the Caribee Isles.The figures are quoted in US ($M).$USVisible tradeExports 24 000Imports 26 000Invisible (net)Exports 20 000Imports 15 000(a) (i) Differentiate between a country’s terms of trade and its balance of trade. (3 mks)(ii) Calculate Tropicalo’s balance of trade using the figures given above. (2 mks)(b) Calculate Tropicalo’s current account balance using the figures given above. (3 mks) You are not required to explain the calculations in (a) (ii) and (b).(c) Identify two ways in which a country may have a surplus on its current account.(4 mks)(d) (i) Explain what is meant by ‘balance of payment’. (2 mks)(ii) Discuss three ways by which a country would be able to finance the deficit in its balance ofpayments. (6 mks)Total 20 marksDISCUSSION AND GUIDELINE ANSWER(a) (i) A country’s terms of trade refers to the rate at which its goods and services exchange for the goodsand services of another country. It is calculated as:
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESSIndex of export prices x 100Index of import pricesWhereas, a country’s balance of trade is the difference between the country’s imports and exports ofgoods only. To properly differentiate between the two terms, the candidate should use terms such as ‘onthe other hand’, ‘while’, ‘whereas’, etc.(ii) The balance of trade in this case is:24,000- 26,000-2,000US ($M)(minus 2,000 US($M) )(b) The current account balance takes into consideration the visible trade balance and the invisible tradebalance. From (a) (ii) we found the visible trade balance (balance of trade) to be minus 2,000 US ($M). Theinvisible trade balance is plus 5,000 US ($M). This is the difference between invisible exports and invisibleimports. The current account balance is plus 3,000 US ($M). (c) Exporting more goods and services than it imports Import less than it exports If the positive visible balance exceeds the negative invisible balance(d) (i) A country’s balance of payments is its annual record of trading with other countries in terms ofincome from exports and expenditure for imports.(ii) To finance a deficit is different from correcting the deficit. To finance the deficit, the country must findways to make the balance of payments balance by covering the deficit. This includes: Importing the deficit amount on credit Loans from other countries Loans from international financial institutions e.g., International Monetary Fund and the World Bank. Debit the foreign reserves account
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS Grants from other countries Sell gold reserves, etc.Any short-term solution which results in the amount of money to cover the deficit, if properly discussed,will earn two marks each.14) January 2006, General past paper, question number eightGovernment has a responsibility to protect consumers as well as to provide a climate for businesses tosurvive.(a) State TWO reasons why consumers need protection. (4 mks)(b) Identify THREE ways in which the government of your country can ensure that consumers’ safety andwell-being are protected. (6 mks)(c) Discuss THREE ways in which the government may help businesses to succeed.(6 mks)(d) State TWO ways by which the government can ensure that businesses protect the environment. (4 mks)Total : 20 marksNow, for my discussion and guideline answers. I hope they will help you in getting a fair understanding ofthe question.Discussion and guideline answers.(a) There are many reasons why consumers need to be protected. These reasons include the fact that theyreceive: Short change, short weights and short measurements Unsafe and poor quality products Misleading price reductions and false sales False claims about products Insufficient goods for their money Unfair treatment when faulty goods are returned, etc.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESSIn addition, consumers are not always able to make a good assessment of the goods they buy. Theycannot protect themselves and therefore need to be protected.Candidates should state clearly any TWO reasons for consumer protection.(b) Some of the ways in which the government can ensure that consumers? safety and well-being areprotected are: By setting up consumer protection agencies such the Ombudsman, the Bureau of Standards and theConsumer Affairs Commission. By educating and advising consumers through pamphlets, radio and TV programmes. Through the introduction of penalties for producers and sellers who show lack of regard forconsumers. By passing legislation/laws that ensure consumer protection, e.g., processed food acts, PublicHealth Act, The Standard Act and The Food and Drugs Act. By the control and supervision of prices. By enforcing fair trading practices. By supervising hire purchase and credit control, etc.(c) Government can help businesses to succeed by: Giving them loans with little or no interest to be paid back. Allowing them subsidies and grants which result in the lowering of costs of production. Providing business educational opportunities free or at very low cost. Allowing the importation of essential raw materials duty free. Providing free zone areas for the location of businesses. Reducing corporation tax which reduces overall costs and boosts profits. Assisting businesses in finding markets and in the marketing of their products, etc.For this part of the question, the THREE points selected must be properly discussed to score full marks.(d) The protection of the environment has become increasingly important. The government can ensurethat businesses protect the environment by: Introducing a pollution tax. Taking over the production where businesses fail to protect the environment.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS Passing legislation or laws against practices that damage the environment. Having inspectors go around and ensure that practices are not damaging to the environment. Giving warnings which if not adhered to, result in the business being taken to court or some otheraction. Encouraging the location of businesses in special areas where their production practices will notharm the environment, etc.1. The basic needs of man are:a) land, money, carb) food, money, landc) food, clothing, shelterd) food, shelter, money2. The most important principle upon which barter trade depends is known as:a) insurable interestb) indemnity principlec) utmost good faithd) double coincidence of wants3. Mary lives in a country in which the state makes all the decisions about economic activities. Thatcountry has adopted the:a) planned economic systemb) mixed economic systemc) free economic systemd) Capitalist economic system4. The most important role of a business in any community is to:a) pollute the environmentb) earn foreign exchangec) provide revenue for the governmentd) provide goods and services to satisfy the wants of people
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS5. Consumers are those individuals who:a) buy their goods from a consumers cooperative societyb) consume all the goods produced by manufacturersc) provide goods and services for our satisfactiond) utilise the goods and services provided to satisfy wants6. The public sector comprises:a) a body of public corporations, public companies and municipal undertakingsb) a combination of public companies and public corporationsc) an association of all public companies within the countryd) central and local government organisations and state corporations7. Which of the following business organisations belong to the private sector?a) municipal authorityb) nationalised industriesc) public corporationsd) public limited companies8. In a partnership, an investor is a partner.In a large company, an investor is a:a) sole traderb) managerc) directord) shareholder9. What is the maximum number of share holders a private limited company can have?a) twob) fivec) fiftyd) eighty
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS10. The relationship between the highest level of management down to the various departments is knownas:a) flowb) rankc) staffd) line11. If X offers Y a book for $5, but Y says that he can only pay $4.50 for it, this is an example of:a) an offerb) a counter offerc) an invitation to treatd) consideration12. An item displayed in a store with a price tag is an example of:a) an offerb) a counter offerc) an invitation to treatd) consideration13. John buys goods to the value of $150, but is allowed 20% trade discount on the invoice, plus 5% cashdiscount. He will therefore pay:a) $112.50b) $114.00c) $126.00d) $142.5014. If you received less goods than was ordered and paid for, your supplier would send you:a) a credit noteb) an invoicec) a debit noted) a bill of exchange
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS15. When a cheque is crossed, it means that:a) something is wrong with itb) it is cancelled and not good anymorec) the money cannot be withdrawn immediately, but has to be lodged to an accountd) it can be taken to a bank and the money stated withdrawn at once16. Which of the following is the most important characteristic of money?a) acceptabilityb) durabilityc) limited supplyd) portability17. The only bank which can claim to be a lender of last resort is the:a) merchant bankb) central bankc) commercial bankd) trustee savings bank18. The document that has details of the source of goods, the raw materials from which the goods aremade, is called the:a) shipping noteb) certificate of originc) bill of ladingd) bill of exchange19. Assurance policies specifically refer to:a) personal life coverageb) coverage of risks involving cargo transportc) loss of goods due to hurricaned) loss of sale of goods
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS20. A man insured his property for $80,000, but its true value was $100,000. A fire caused $10,000 worthof damage. The insurance will pay out:a) $10,000b) $8,000c) $5,000d) $6,500The answers to multiple choice questions:1.c 2.d 3.a 4.d5.d 6.d 7.d 8.d9.c 10.d 11.b 12.c13.b 14.a 15.c 16.a17.b 18.b 19.a 20.b.1. Which of the following is not a factor of production?(a) food(b) land(c) labour(d) capital2. Which one of the following will have the effect of reducing the supply of labour?(a) a high birth rate(b) a large population(c) a high proportion of old people(d) a low proportion of very young people3. The labour force of a country is:(a) all people below retirement age(b) all persons who are employed or are available for work(c) the total population(d) all persons over the school leaving age
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS4. The education of the labour force is a major determinant of which of thefollowing?(a) the supply of labour(b) the labour force as a whole(c) the mobilisation of labour(d) the efficiency of labour5. Which of the following does not have a direct effect on the efficiency of labour?(a) the quality of education of the workers(b) the wages paid to workers(c) a country’s cultural practices(d) working conditions6. Labour is classified as:(a) size, age, mobility(b) size and mobility(c) skilled, semi-skilled and unskilled(d) skilled and semi-skilled7. The rewards to the factors of production are:(a) salaries, wages, profit and interest(b) wages, rent, profit and interest(c) rent, capital and profit(d) profit, capital, rent, wages8. Occupational mobility of labour refers to the:(a) ease with which workers are transported to their jobs(b) frequency with which workers move from one job to another(c) degree of efficiency with which workers perform their tasks.(d) willingness and stability of workers to acquire new skills.
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS9. Each year, some high school graduates of the Caribbean rural communities move to the towns andcities to live and work. The movement of such persons could be described as:(a) expected migration(b) external migration(c) cross-country migration(d) internal migration10. People who migrated from the West Indies in the early 1950′s went to all of the following countries ona large scale except:(a) Great Britain(b) Japan(c) Canada(d) United States of America11. Unemployment that results from a ‘slump’ in the economy can be described as:(a) frictional unemployment(b) seasonal unemployment(c) residual unemployment(d) cyclical unemployment12. The ’4-H’ Club and the Lion’s Club are examples of`(a) multinational companies(b) community self-help organisations(c) monopolies(d) voluntary chain stores13. Natural resources may also be referred to as:(a) capital(b) labour(c) land(d) Entrepreneurial skills14. Which of the following is the best example of capital as a factor of production?
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(a) machinery(b) shares(c) debentures(d) money15. Circulating capital is:(a) money and inventory used to finance the day to day running of a business.(b) Capital that changes from one form to another and back to its original form(c) The money paid to workers for maintaining day to day production.(d) Any man-made item that assists in production.16. Which of the following is a fixed asset?(a) A bicycle for private use(b) A washing machine for resale(c) A motor car for family use(d) A truck for delivery of goods17. The reward to capital is:(a) profit(b) interest and dividends(c) rent(d) wages18. The term ‘human resources’ refers to(a) materials and goods made by human beings(b) raw materials used in the manufacture of goods(c) persons available for productive and professional services(d) capital invested by shareholders in a company.19. The ‘Human Resources’ are:
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESS(a) students in tertiary institutions(b) labour and entrepreneurial skills(c) monies used by humans in production(d) resources produced by humans.20. A person responsible for bringing together and organising the factors of production is the(a) entrepreneur(b) trade-unionist(c) manager(d) financierEnd of Test1. The advantages of a sole trader over a partnership form of business include which of the following?i) Profits are shared.ii) Risks are greater.iii) The sole trader is his or her own boss.iv) The partners can contribute capital to expand the business.A) (i) and (ii) onlyB) (i) and (iii) onlyC) (iii) onlyD) (i) and (iv) only2. In a partnership, an investor is a partner. In a large company, an investor is a:A) sole trader.B) manager.C) director.D) shareholder.3. A sleeping partner is otherwise known as a:
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESSA) careless partner.B) active partner.C) dormant partner.D) general partner.4. Which of the following are disadvantages of a private limited company?i) It has an independent legal status.ii) The firm cannot raise capital on the stock exchange.iii) The firm cannot have more than 50 shareholders.iv) The firm has too many taxes to pay.A) (i) and (ii) onlyB) (ii) and (iii) onlyC) (i) and (iv) onlyD) (iii) and (iv) only5. To comply with legal requirements to register a private limited company, the firm must provide at leasttwo documents. These are:A) a prospectus and a certificate of origin.B) a memorandum of association and articles of association.C) a certificate of trading and tax file number.D) a share certificate and a debenture certificate.6. Those partners who, when their business goes bankrupt, stand to lose all their personal possessions aswell as their investments are known as:A) unlimited liability partners.B) limited liability partners.C) ordinary partners.D) sleeping partners.7. The form of business where shares are allowed to be sold only to owners of the business or to theirrelatives or employees is known as:
CXC PAST QUESTIONS AND ANSWERS –PRINCIPLES OF BUSINESSA) partnership.B) private limited company.C) public limited company.D) multinational company.8. The main aim of a co-operative retail society is to:A) make a profit from its member-customers.B) buy and sell goods retail.C) buy goods wholesale and sell them cheaply to its members.D) organise and plan the running of the society.9. Company A owns all these businesses: soft drink company, bakery, shipping company and motor-carassembly company. Company A is an example of a:A) conglomerate.B) multinational.C) private limited company.D) partnership.10. If one company, A, has or owns the majority shares in another company, B, then company A can bestbe regarded as being a:A) holding company.B) partnership.C) co-operative.D) joint-stock company.Now you can have a look at the answers to see how well you have done.1. C 2. D3. C 4. B5. B 6. A7. B 8. C9. A 10. A