a the

b the merchant banks;

c the advertising agencies;

d the insurance companies.

9 Goods which are sold by the home country to an overseas country are called:

a Bills of Exchange;

b Bills of Lading;

c expensive goods;

d exports;

e imports.

10 Which of the following is the kind of manufacturing that is often called the production line method?

a batch production;

b unit production;

c mass production;

d continuous process production.

D Essay questions

Use three to four sides of A4 paper for each answer.

Approximately 3 to 4 sides of A4 paper should be used when answering an essay type questions in a paper which gives about half an hour for the questions to be answered. With structured questions, write as much as you can in the space provided for the answer. Short answers are not usually good answers.

1 A man who had recently set up his own retail shop in a small town was heard to say to a friend that the would not be using the banks, the insurance services, advertising services or transport he thought that they were a waste of money.

Write an essay saying why you disagree with him and explain how these Aids to Trade give services to all kinds of businesses.

2 This pie diagram represents the capital invested in the industries in 1988.

1. Describe the manufacturing industries in Great Britain and explain why they are so important to the Balance of Trade.

2. In recent years the extractive industries in Great Britain have been developed to the advantage of the economy. Explain this statement.

3. The service industries of banking, transport, insurance and tourism have become increasingly important to our invisible trade in recent years. Describe what you know about these industries.

3 Coffee is grown in Brazil and drunk in Great Britain. Describe in full detail how the Chain of Commerce and the Aids to Trade make thus possible.

4 Write an essay about the kind of small business which you would like to own, and say how would control it and make it successful. (20 marks)

5 An organization will have advantages and disadvantages whether it is a one man business with unlimited liabilities or a limited company with limited liabilities. Discuss these advantages and disadvantages. (20 marks)

E Project question

Fill in the following table by looking up the share prices of firms in your newspaper.

NAME OF THE FIRM	1st PRICE	2nd PRICE	3rd PRICE

3. The commercial banks

A bank is an intermediary between a depositor and a borrower. Commercial banks may be found in most towns and cities and examples of them are such common names as Barclays, Lloyds, Midland and National Westminster.

Bank Base rate

5%

Depositor A Borrower B

(£100+£3) (£100+£7)

Depositor A deposits £100 with his bank for one year. He is paid an interest rate of say 3%. At the end of the year, the £100 will have become £103. Meanwhile the bank will lend that £100 to a borrower and charge him an interest rate of say 7%. At the end of the year the borrower will have to pay £107 back to the bank. Thus the bank has made gross profit of £4.

The interest rate which the commercial banks charge borrowers and pay the depositors will be influenced by the interest rate figure which is quoted from time to time by the Bank of England, which is, of course, controlled be the British government. If the Bank of England recommends that the interest rates will have to rise then the commercial banks and most other financial institutions will also raise their interest rates.

A rise in the interest rate will make borrowing more expensive and saving more attractive. A fall in the interest rate will make borrowing cheaper and saving less attractive.

The government may use the interest rate (sometimes called the Bank Rate) to regulate the economic climate of the country. By this we mean that if borrowing becomes more expensive, businessmen will become more reluctant to borrow and develop their businesses, but if it falls then they will possibly borrow more money and the economy will probably become more active.

If the economy becomes too active, there is usually a tendency for inflation to occur, and this is usually caused by too many goods being produced and too much money circulating in the economy. As the goods are bought up the prices rise and inflation occurs.

To combat inflation the government will often raise the interest rate. If the economy was stagnant then the interest rate would probably be lowered to encourage it to expand and become more active.

There are, of course, other factors which the government must consider before it influences the financial institutions to raise or lower their interest rates.

Banks make a profit by:

1. Making loans to businessmen and private individuals.

2. Charging interest payments on overdrawn accounts.

c debentures;

d government securities.

2 A public limited company is owned by the:

a board of directors;

b government;

c shareholders;

d debenture holders.

3 The principles of unlimited liabilities apply to:

a private companies;

b the sole trader;

c public companies;

d Co-operative retail societies.

4 When someone wants to start up a business he or she will usually obtain money from:

a a banker’s draft;

b the commercial banks;

c personal savings;

d a bank overdraft.

5 In which of the following organizations is the original owner no longer the sole decision maker?

a the sole trader;

b the maker trader;

c the partnership;

d the self-employed decorator.

6 What is the maximum number of partners you are allowed to have by British company law in a private limited company?

a 10;

b unlimited;

c 20;

d 35.

7 Which of the following according to British company law must always be paid first?

a dividends to ordinary shareholders;

b dividends to deferred shareholders;

c dividends to preference shareholders;

d fixed interest to debenture holders.

8 Of the following kinds of share which one is usually ‘accumulative’?

a ordinary shares;

b deferred shares;

c preference shares;

d ordinary ‘A’ shares.

9 What in the maximum number of partners (allowed by British company law) in an ordinary partnership?

a 20;

b 10;

c 40;

d 50.

10 In which kind of business organization is the ownership and control fragmented (split up)?

a the partnership;

b the private limited company;

c the public limited company;

d the one man business.