MBA 1st Year Economic Political Legal Environment Very Short Question Answer

MBA 1st Year Economic Political Legal Environment Very Short Question Answer

MBA 1st Year Economic Political Legal Environment Very Short Question Answer

MBA 1st Year Economic Political Legal Environment Very Short Question Answer
MBA 1st Year Economic Political Legal Environment Very Short Question Answer

MBA 1st Year Economic Political Legal Environment Very Short Question Answer

Economic, Political and Legal Environment: Role of government in business, Legal framework in India. 

Economic Environment: Economic system and Economic policies. Concept of capitalism, Socialism and Mixed economy, Impact of business on private sector, Public sector and Joint sector, Competition Act and FEMA, Monetary and Fiscal policies.

RBI: Role and Functions, Regulations related to capital markets, Role of SEBI and Working of stock exchanges.

Section A


Ques.1. What is the role of government in business?

Ans. Government in India has an all pervasive and predominantly restrictive influence over the various aspects of business, e.g. industrial licensing that decides location, capacity and process, impom licensing for machinery and material, size and price of capital issue, etc.

Ques.2. What do you mean by economic environment of a business?

Ans. Economic conditions, economic policies and the economic system are the important external factors that constitute the economic environment of a business. Economic environment consists of macro level factors related to means of production and distribution of wealth in a country or region These factors have a significant impact on the demand and supply of a business of an organisation,

Ques.3. What is the concept of capitalism?

Ans. Capitalism is an economic system where the trade, industries and means of production are completely privately owned. It can also be termed as free market economy or a capitalist economy and involves no interference from the government

Ques.4. Define mixed economy.

Ans. An economic system in which both the private enterprise and a degree of state monopoly (usually in public services, defiance, infrastructure and basic industries) co-exist. All modern economies are mixed where the means of production are shared between the private and public sectors, also called dual economy.

Ques.5. Give any two merits and demerits of mixed economy.

Ans. Merits of Mixed Economy: 1. Government and private enterprises work together for economic development

  1. Maximum utilisation of resources is made under mixed economy. 

Demerits of Mixed Economy: 1. It is unsuccessful in eradicating economic fluctuations.

  1. It involves non-cooperation between the two sectors.

Ques.6. What do you understand by private sector?

Ans. Private sector is the division of economy which is managed by private groups or individuals with the prime objective of profit earning without any direct interference of government. These are a part of voluntary sector of the economy and include sole traders, partnership firm joint stock companies, etc.

Ques.7. Growth of private sector is helpful in the development of public sector. Give two genuine reasons.

Ans. The two reasons are:

  1. Making public sector units more competitive.
  2. Enabling the profit earning public sector units to modernise and diversify the business.

Ques.8. What is public enterprise?

Ans. The term public enterprise usually refers to government ownership and active operation of agencies engaged in supplying the public with goods and services which alternatively might be supplied by private enterprise operations.

Ques.9. Write down the four importances of public enterprises in India.

Ans. The four importances of public enterprises in India are:

  1. Better allocation of resources,
  2. Social justice,
  3. Economic stability,
  4. Generation of surplus.

Ques.10. What are the various forms of public enterprises? 

Ans. Public enterprises are said to be having the various forms as given below:

  1. Departmental organisation.
  2. Public corporation.
  3. Government company.
  4. Mixed ownership corporation.
  5. Holding company.

Ques.11. Give the reason which leads to the problem of control and public accountability in the public enterprise.

Ans. The reason behind the problem is undue influence of political leaders, several committees and commissions appointed for different issues, etc. 

Ques.12. Mention some disadvantages of mixed ownership cooperation. Ans. The disadvantages of mixed ownership cooperation are: .

  1. Conflicts are bound to arise as public and private interests are opposed to each other.
  2. Profit motive creates conflicts over basic policies.

Ques.13. What do you know about Competition Act?

Ans. Competition Act was enacted by the government in 2002 which has replaced the earlier MRTP Act, 1969. It extends to the whole of India except the state of Jammu and Kashmir. Its main objective is to ensure fair competition in India by prohibiting trade practices which cause adverse effect on competition in markets within India.

Ques.14. Why was competition commission of India established?

Ans. As given in Section 7 of the Competition Act, 2002, competition commission of India was established to further the cause of competition as described in the preamble to the Act. It has been established to prevent practices having adverse effect on competition, to promote and sustain competition in markets, etc.

Ques.15. What do you know about FEMA?

Ans. Foreign Exchange Management Act (FEMA) relates to the foreign direct investment in the country. It has helped the country by encouraging external payment and trade. Its objective is to consolidate and amend FERA so as to promote foreign trade while promoting the country’s foreign exchange market. Thus, FEMA aims to promote foreign payments and trade in the country,

Ques.16. Define monetary policy.

Ans. Monetary policy is a policy authorising central banks to control the supply of money as an instrument of achieving the objectives of general economic policy

Ques.17. Discuss the nature of monetary policy.

Ans. Monetary policy gives a platform or a base to announce the rules and regulations or norms for the RBI governed bodies as banks FII’s, non-banking finance companies, primary dealers in money markets. Monetary policy is announced twice a year-one for the slack season (April-September)

one for the busy season (October-March) in accordance with agricultural cycles. This cycle coin with half of the financial year. But inspite of this, the share of non-food credit in total credit has go up and the share of agricultural credit come down. The monetary policy will be an annual affair was decided by RBI. The policy aims at adequate financing of economic growth and at the same time ensuring reasonable price stability.

Ques.18. Write down any three objectives of monetary policy. 

Ans. The three objectives of monetary policy are:

  1. Neutrality of money, money is only a technical device.
  2. Exchange rate stability by using interest rate mechanisms.
  3. Promotion of economic growth by raising financial resources,

Ques.19. Give any three limitations of monetary policy. 

Ans. The three limitations of monetary policy are:

  1. The time lag.
  2. Problem in forecasting.
  3. Underdevelopment of money and capital markets.

Ques.20. Define fiscal policy.

Ans. Fiscal policy may be defined as government programme of taxation, expenditure and other financial operations to achieve certain national goals.

Ques.21. What are the main objectives of fiscal policy? 

Ans. The main objectives of fiscal policy are:

  1. Full employment.
  2. Economic stabilisation.
  3. Economic growth.
  4. Social justice or equality in distribution of income and wealth.

Ques.22. Mention certain measures which will help to reduce fiscal deficit.

Ans. In the context of Indian economy, the following measures can be undertaken to reduce fiscal deficit:

  1. Reduction in expenditure on major subsidies such as food, fertilisers, exports.
  2. Reduction in the huge sum of money spent by the government on LIC bonus, leave

encashment, etc.

  1. Reduction in fresh recruitment of government staff along with abolition of large
  2. Curtailment of unnecessary expenditure in government department.

Ques.23. What were the basic reasons for nationalisation of RBI? 

Ans. The basic reasons for nationalisation of RBI were as follows:

  1. There was a trend towards nationalisation of central banks of the country in all parts of the

world after the end of second world war.

  1. To control the inflationary tendencies prevailing during second world war, it was thought to nationalise the RBI.
  2. The country had embarked upon a planned economic programme after independence So. nationalisation became necessary for economic development of the country

Ques.24. Why was SEBI established?

Ans. SEBI (Securities and Exchange Board of India) was a land mark government measure mainly established to monitor and regulate capital market activities and to promote healthy development of the larkets. It has been empowered to conduct inspection of stock exchanges under the SEBI Act, 1992.

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