Expenditure and Saving Objective Type Questions (1 Mark)

Question 1.
Income is utilized in:
(a) Expenditure
(b) Saving
(c) Either (a) or (b)
(d) Both (a) or (b)
Answer:
(d) Both (a) or (b)

Question 2.
The expenditure has been classified into:
(a) Individual Expenditure
(b) Social Expenditure
(c) Neither (a) or (b)
(d) Both (a) or (b)
Answer:
(d) Both (a) or (b)

Question 3.
Social Expenditure are of obligatory expenditure and ……….
(a) Individual Expenditure
(b) Consumption Expenditure
(c) Optional Expenditure
(d) None of these
Answer:
(c) Optional Expenditure

Question 4.
Saving is defined as the excess of income over ………
(a) Consumption Expenditure
(b) Production Expenditure
(c) Optional Expenditure
(d) Individual Expenditure
Answer:
(a) Consumption Expenditure

Question 5.
When a person incures some expenditure for the benefit of the society, such expenditure is known as ………..
(a) Individual Expenditure
(b) Social Expenditure
(c) Consumption Expenditure
(d) Optional Expenditure
Answer:
(b) Social Expenditure

Expenditure and Saving Definite Answer Type Questions (1 Mark)

Question 1.
Write the type of Income.
Answer:
(i) Monthly Income
(ii) Real Income.

Question 2.
Write the types of social expenditure.
Answer:
(i) Obligatory Expenditure and
(ii) Optional Expenditure.

Question 3.
What is its called when money received by a person in return of this work services or utilizing his property for any production purpose.
Answer:
Income.

Expenditure and Saving Very Short Answer Type Questions (2 Marks)

Question 1.
Define Expenditure.
Answer:
Expenditure is the way by which man meets out his necessities. In other words, Expenditure is that portion of the income with which human being derive present day satisfaction.

Question 2.
How saving is disadvantageous to society as a whole?
Answer:
Disadvantages to society as a whole are as follows:
(a) Rise of class conflicts: Savings which far exceed the limits will ultimately result in class-conflicts. Huge savings on the part of the monopolists put them at an advantageous position and they, therefore, exploit the weaker sections of the society.

(b) Fear of over-production and Unemployment: Savings help in the formation of capital, and the use of capital give rise to further production. Increased production still further increases capital formation. This tendency, therefore, leads to overproduction.

Question 3.
How the saving is disadvantageous to an individual?
Answer:
Disadvantages to an individual ate as follows:
(a) Psychological effect: Postponement of present wants for future gains involve an element of sacrifice on the part of an individual. Consumption, whether it is useful or wasteful, has to be set aside in order to make savings. A person needs to tighten on his belt to save an amount which he thinks may help to enjoy at a later stage. But how many persons are really able to enjoy this?

(b) Chance of Exploitation: To a mss wealth in order to keep it for future purpose can give rise to exploitation. In addition, if a person gives undue emphasis to savings, he may even resort to evil and undesirable methods in order to attain wealth.

(c) Create a group of Spendthrift and Lazy Persons: These persons who are lucky to get savings from their parents for the creation of which they have not put any effort, fail to understand the need to utilize the savings for productive purposes.

Question 4.
Point out the difference between expense and saving. (UP 2019)
Answer:

Expenditure and Saving Short Answer Type Questions (4 Marks)

Question 1.
What are the points of difference between saving and expenditure?
Answer:
Difference between Savings and Expenditure: Savings and expenditure can be distinguished in the following way:
(a) Savings help a person to satisfy his future wants, while expenditure satisfies his present requirements.

(b) In the case of savings goods and services are applied indirectly to the satisfaction of wants, while in the case of expensive goods and services are applied directly to the satisfaction of wants.

(c) Capital is formed out of the savings of the people and, therefore, saving constitutes the most important aspect of capital accumulation; whereas expenditure does not help in the creation of capital.

(d) Savings increase the income of a person whereas expenditure decreases the income of a person.

(e) A wise and farsighted person saves something from his current income which constitutes saving, while a person who looks wisdom of farsightedness utilises his whole income on expenditure.

Question 2.
Discuss the importance of savings from the point of view of the nation.
Answer:
Importance of Savings to the country can be studied under the following heads:
(a) To raise capital formation: Large scale production of modern times is possible only with the help of huge capital. Savings of the people help the country to accumulate capital. In other words, capital is the result of the savings of the people.

(b) To raise the standard of living of the People: Standard of living of the people depends upon the rate of economic development achieved by a particular country. Rapid economic growth enables its citizens to enjoy the high standard of living.

(c) To Increase Employment Opportunities: Mechanization, large scale production, division of labour and all-round development of the country will create more and better employment opportunities to the people in a country. This is possible only if people are in the habit of saving and moreover are capable to save.

(d) To achieve military power: Savings help a country to achieve military power. The strength of the armed forces to safeguard its boundaries and to wage successful battles bring glory to this nation. Savings, therefore, are of grant importance to increase the might of the forces in a particular country.

Expenditure and Saving Long Answer Type Questions (8 Marks)

Question 1.
What do you understand by expenditure and saving? Discuss the objectives and social importance of saving. (UP 2009, 18, 15)
Or
Describe the importance of saving in society. (UP 2018)
Answer:
Expenditure: Expenditure is that portion of the income with which human beings derive present day satisfaction. In other words, expenditure is the way by which man meets out his necessities.
Savings: Saving is that part of income which is not spent by an individual for satisfying his present-day necessities but is kept aside for meeting out uncertainties and crisis in future.
Objectives of Savings: Following are some reasons behind savings:

1. To Create Capital: Savings are made for the purpose of creating capital to earn more income in future.

2. To Meet Out the Calamities: Sometimes a man has to face a critical situation in which he has to spend more than his income. In that case, his savings cover the gap between income and expenditure.

3. Provision for Old Age: In old age, the earning capacity of a person decreases and he needs more money. So savings are made to provide for old age.

Importance of Savings: Following are some importance of saving:

1. To Raise capital-formation: Large scale production of modern times is possible only with the help of huge capital. Savings of the people help the country to accumulate capital. In other words, capital is the result of the savings of the people.

2. To Raise the Standard of Living of the People: Standard Pf living of the people depends upon the rate of economic development achieved by a particular country. Repaid economic growth enables its citizens to enjoy the high standard of living. A country whose people do not have the capacity to save will have only a low per capita income. Higher the per capita income, higher the standard of living of the people.

3. To Increase Employment Opportunities: Mechanization, large scale production, division of labour and all-round development of the country will create more and better employment opportunities to the people in a country. This is possible only if people are in the habit of savings.

Question 2.
What is the relationship between expenditure and savings?
Answer:
Relationship between Expenditure and Savings: Expenditure and Income result in the increase of production. They increase the economic developments and helps in the upliftment of the nation’s status because both satisfy the various requirements of a human being. The only difference is that savings help a person to satisfy his future wants, while expenditure satisfies his present requirements.

Economists are having two different views in this connection according to one group of economists, “Expenditure is one of the best means for society’s welfare.” On the other hand, other economists suggest that “Savings is the only cause of society’s welfare.”

Those who are of the opinion that savings are more important than the expenditure argue the same because of the following reasons:

1. Savings lead to the capital formation which helps in the production of further wealth. Accumulation of capital increase production in leaps and bounds boosts trade and commerce and earns huge profits for government and industrialists, which induce them to start more productive units.

2. The workers will enjoy more and better employment opportunities. Hence, a nation whose people give more importance to savings than expenditure enable them to achieve economic development.

3. The national income and per capita income of the people will also simultaneously increase owing to increased savings.
The other group of economists which favour expenditure says that the amount spent by the people will proportionately increase the demand for commodities in the market. With increased demand, industrialists will be induced for increasing production. They will set up new units for earning more profits resulting in better employment opportunities with more wages. The material prosperity of the country will have its far-reaching effect in all walks of human activities. People can increase their income and reuse their standard of living.

From the above study, it can be concluded that for the economic development of a country both savings and expenditure are equally important and the country cannot achieve material prosperity without their co-ordinated functioning. Hence, savings and expenditure are like the two tracks on which a nation progresses.

Question 3.
Give the main points of difference between Saving and Expenditure.
Answer:
Savings and expenditure can be distinguished in the following way:
1. Savings help a person to satisfy his future wants, while expenditure satisfies his present requirements.

2. In the case of savings, goods and services are applied indirectly to the satisfaction of wants, while in the case of expenditure, goods and services are applied directly to the satisfaction of wants.

3. Capital is formed out of the savings of the people and, therefore, savings constitute the most important aspect of capital accumulation; whereas expenditure does not help in the creation of capital.

4. Savings increase the income of a person whereas expenditure decreases the income of a person.

5. A wise and farsighted person saves sometimes from his current income which constitutes savings, while a person who lacks wisdom and farsightedness utilizes his whole income on consumption.

UP Board Solutions for Class 10 Commerce