JNTU B.Tech II BUSINESS ECONOMICS AND FINANCIAL ANALYSIS Previous Question Paper (October - 2020 - R18)

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time, which results in a decline in the purchasing power of money. When the general price level rises, each unit of currency buys fewer goods and services.

The main types of inflation include:

• Demand-Pull Inflation: Occurs when the aggregate demand for goods and services exceeds the aggregate supply, often described as 'too much money chasing too few goods.'
• Cost-Push Inflation: Caused by an increase in the cost of production (such as wages or raw materials), forcing producers to raise prices to maintain profit margins.
• Built-in Inflation: Linked to adaptive expectations, where workers demand higher wages to keep up with rising living costs, leading to a wage-price spiral.
• Hyperinflation: A very rapid, out-of-control increase in prices, typically exceeding 50% per month.
• Creeping Inflation: A mild, slow rise in prices (usually 1-3% annually) that is often considered beneficial for economic growth.

A partnership is a form of business organization where two or more individuals pool their resources, capital, and skills to carry on a business with the objective of sharing profits and losses. It is governed by a partnership deed which outlines the rights, duties, and liabilities of the partners.

The disadvantages of a partnership include:

• Unlimited Liability: Partners are personally liable for the debts of the business. If the business assets are insufficient, their personal assets can be attached to settle claims.
• Instability: The partnership may be dissolved upon the death, insolvency, or insanity of any partner, leading to business uncertainty.
• Conflict of Interest: Differences in opinion or management styles among partners can lead to disputes, hindering effective decision-making.
• Limited Resources: Compared to a company form of organization, the capital-raising capacity is limited to the personal wealth and borrowing capacity of the partners.
• Lack of Secrecy: Since business affairs are managed by multiple partners, maintaining trade secrets and confidential information is more difficult than in a sole proprietorship.
• Mutual Agency: The actions of one partner bind all other partners, meaning one individual's error or misconduct can negatively impact the entire partnership.