B.Com Ist Year Savings And Investments Short Question Answer Notes Study Material Short Question with Answer Topic-wise Unit-wise Study Notes
Short Answer Questions Notes
Q.1. Distinguish between Savings and Rate of Savings.
Ans. Savings : Savings refers to that part of money income which is not spent on consumption. In other words, saving is excess of income over consumption expenditure. Thus, S=Y-C.
Rate of Savings: When savings is measured at market price at a percentage of gross demestic product, it is known as rate of savings. It can be denoted as Gross Saving Rate and Net Saving Rate as follows:
Gross Savings Rate : To find gross saving rate, gross domestic savings is divided by the gross domestic product.
Net Savings Net Saving: To find net savings rate, gross domestie savings after deducting capital depreciation is divided by the net domestic product. Pat Gross Domestic Product.
Q.2. Discuss the main causes of low savings and invest.
ment rate in India.
Ans. See Page 24 and 25.
Q.3. Suggest measures to increase the Saving and Investment Rate in India.
Ans. See Page 25.
Q.4. Distinguish between Savings and Investments.
Ans. See Page 23.
Q.5. Distinguish between Real Investment and Financial Investment.
Ans. Financial Investment: Financial investment we mean to buy shares, stocks, bonds and securities which are already existing in stock market. It is simply a transfer of existing assets or . exchange of money from one person to another. It does not affect the level of output and employment in an economy because one party has made the investment, while another has made the disinvestment.
Real Investment : Real investment we mean the purchase of securities, bonds or equities of companies to be newly started. It means addition to the existing stocks of real capital assets. In other words investment means, investment in the building of new machines, new factory buildings, roads bridges and other forms of productive capital stock. It leads to increase in the production, income and employment.
Q.6. Give Difference between Capital and Capital Formation.
Ans. Capital means the total stock of capital goods in existence while on the other hand investment (capital formation) refers to vhat has been added to the stock of capital goods in a year. Thus, nvestment is the amount by which the stock of capital of an conomy increases. It does not include the purchase of existing ecurities, bonds, debentures etc.