POB CSEC PAPER 2 SOLUTIONS, Principles of Business - CSEC - Paper 02

JAN 2016 CXC POB Past Papers Answer

Learn how to answer CSEC CXC POB PAST PAPERSPrinciples of Business (POB) 2016 Past Paper Questions. Please see below a pdf copy of January 2016- Paper 02 Question Paper, followed by Suggested Answers. These answers could be incorporated into your Principles of Business Notes for effective studying.

Disclaimer: Kindly note that these should be used as a guide. Also, do you want to get familiar which changes to the CSEC CXC Principles of Business Exam, check out the post on CSEC Principles of Business Exam Format. Should you have any questions or suggestions, feel free to let me know in the comment section below. Don’t forget to share, like and follow this blog. Happy Studying! 🙂

P.S. Don’t forget to get out the other CXC POB Past Papers.

CXC POB Past Papers Answers ~ January 2016

– Question 1 –

Topics: Economic Systems , Stakeholders, Role of a Business

(Economics For You, 2019)‌

(a) (i) Traditional economic system (2 marks)

The traditional economic system was present in the early societies were centered around communities and produced food and essential goods for a simple lifestyle. Enough was created to satisfy the needs of all persons, hence no surplus or wastage. Barter was used to obtain products and services the community did not produce itself (Amadeo, 2018).

(a) (ii) Planned Economic System (2 marks)

A command economy is where a central government makes all economic decisions (Amadeo, 2012). Lester (2017) states that in a Planned economy, the government decides :
1) What to produce?
2) How to produce it?
3) Who gets to consume it?

The government influences and control significant economic variables such as investment, savings, exports, and imports.

(b) (i) State TWO advantages of a mixed economic system. (2 marks)

  • The government is free to pass laws to protect natural resources as well as its citizens.
  • Effective and efficient use of resources which can provide a wider variety of products and services available.
  • Provides the freedom to own private property.
  • It encourages lesser income equality.
  • It creates a balance in regional development.
  • It promotes a quick economic development (Lombardo, 2017)

(b) (ii) State TWO disadvantages of a mixed economic system. (2 marks)

  • There may not be a balance between the private sector and the public sector (government) in a mixed economy. Also, conflict of interest may exist.
  • A mixed economy often has higher tax rates than other economy types (Ayres, 2009). Similarly, it can lead to higher taxes. For instance, the government can invest in the economy and still gain revenue through taxation (Lombardo, 2017). For example, World Atlas stated that the top 10 highest income tax rates are present in Europe, notably Belgium leading the way with 40.7% (Ayres, 2009).
  • It creates private businesses which could disrupt the economy.
  • It brings about the fear of nationalization.

(c) Outline THREE ways in which a business could fulfill its role to government. (6 marks)

  • Businesses should pay its taxes e.g., customs duty on purchases, ensuring PAYE for employees.
  • Obeying the laws set by the government e.g., zoning laws (not setting up a commercial business in a residential area).
  • A business can assist with the growth of an economy with job creation as well as increasing trade activities.
  • Businesses can contribute to social services for a country such as donating and sponsoring sporting activities, health, education, and infrastructure of communities.

(d) ONE way in which EACH of the following stakeholders contributes to the success of a business:

(d) (i) Business owners (3 marks)

The business owner plays a critical role since they can manage their business or hire a competent manager to do so. The business owner provides resources required for planning, organizing, leading, controlling to make effective decisions in the best interest of the business and the various stakeholders. Business owners also make crucial investment decisions and critical strategic planning for their business to succeed. Owners need to treat employees fairly while adhering to laws with their business operations — likewise, the provision of high-quality products and services and ensuring transparently accountable with accurate financial statements.

(d) (ii) Employees (3 marks)

Each employee has roles, duties, and responsibilities that are critical to business success. All jobs are all linked to achieving the business mission, goals, and objectives in an attempt to get closer to their vision. Employees should have a sense of loyalty to the organization and contribute to the growth and survival of the business. All employees are responsible for protecting the brand reputation and assets of the company. Also, the level of productivity and quality of work affects the business. Likewise, employees should keep their employers abreast of all developments. Employees must deliver exceptional customer service to sustain business growth.

CXC POB Past Papers Answers ~ January 2016

-Question 2-

Topics: Teamwork and the Communication Process

Photo by rawpixel.com on Pexels.com

(a) (i) Define the term ‘teamwork‘. (2 marks)

Teamwork is when a group of two or more people interact regularly and coordinate their work to accomplish a common objective.

(a) (ii) TWO advantages of teamwork are: (2 marks)

  • The volume and quality of work done by using teamwork can improve by employees working together.
  • Group interaction and participation will motivate each member.

TWO disadvantages of teamwork are: (2 marks)

1) Conflict – clash of personalities.

2) Group consensus on decision-making, which can be time-consuming, which makes it take longer to make decisions and solve problems, especially if it is an emergency.

3) The cost of training can be high when training team members to work together, and the time it takes to get a team together through Belbin stages of (forming, storming, norming, performing and adjourning).

(b) TWO examples to show how teamwork is used at school or in the workplace are:

1. Teamwork in a school setting

Teamwork can be seen in a school setting when students are assigned to a project or class assignment to collaborate or participate in sports, game, or activity such as football, chest, or dance. For instance, the members of the group need to work together in achieving a set goal or a task.

2. Teamwork in the workplace

In the workplace, teamwork is critical at peak periods in a bank, for instance, where there may be many customers waiting long in a queue. Staff members from other departments can assist the service department by attending to a customer to reduce customer wait time. Hence, achieving excellent customer service.

(c) List FOUR essential elements in the Communication Process are: (4 marks)


(Lumenlearning.com, 2019)‌ Figure 1.0 : The Communication Process

  • Sender.
  • Receiver.
  • Message
  • Communication channel
  • Feedback

(d) ONE example and ONE Strategy, which the following groups can use:

(i) Teachers and students (3 marks)

During classroom meetings, effective communication can be used by students for discussing upcoming events. By doing so, students are allowed to ask questions and provide suggestions. For instance, when teachers and students meet to plan a booth for the annual school fundraiser.

(ii) Teachers and parents (3 marks)

An example can be the use of parent-teacher meetings where the teachers can inform the parents what the schedules, rules, and regulations — for instance, annual parents meetings at the beginning of the school year.

CXC POB Past Papers Answers ~ January 2016

Question 3

Topics: Entrepreneur and Entrepreneurship

(a)  (i)  Define the term ‘entrepreneur’.  (2 marks)

Definition of the term entrepreneur:

An entrepreneur is one who organizes the other factors of production to produce goods and services, provides capital to start up and takes risk in investing the capital.

  • organizing
  • provision of capital .
  • risk-taking.

Another definition:

An entrepreneur is a person who identifies a successful business opportunities, risks time and money to start a business, bringing resources together with the intention of generating wealth.

Photo by David McEachan on Pexels.com

(ii)  State TWO advantages and disadvantages of being an entrepreneur.

Advantages of being an Entrepreneur are:

  • Flexible work time schedule- you can be your own boss
  • Freedom to make your own decisions
  • Better salary- get to reap the benefits of keeping all the profits your company earns
  • Its exciting and fulfilling (self-fulfilling)

Disadvantages of being an Entrepreneur are:

  • You wear a lot of hats – a jack of all trade. You have to be good at being an account, marketer , website designer etc. Hence, as the business owner, you take on all the responsibility.
  • You are always at work – long work hours/ many extra hours (at least 60 hours per week)
  • Work-life balance becomes a bit challenging due to longer working hours / Emotional Strain (Stress)– lower quality of life until your business gets established
  • No paychecks can be scary / different income – uncertainty of income
  • Requires capital and the risk of losing your entire invested capital
  • You may have to be available 24 hours a days.
  • Financial risk

(b)   (i)  Identify FOUR characteristics of an entrepreneur.

 FOUR characteristics of an entrepreneur are:

(ii)   Identify TWO problems faced by entrepreneurs.

TWO problems faced by entrepreneurs are:

  • Source of funding for start-ups
  • Failed product lines

(iii) How the problem can be resolved?

  • Solution for source of funding – government agencies for SMEs funding
  • Failed product lines – adopt new product line gradually rather than all at once.

(c) Explain TWO ways in which entrepreneurship benefit an economy.   (6 marks)

TWO ways in which entrepreneurship benefits the economy are:

  • Entrepreneurship is important as it has the ability to improve standards of living and create wealth, not only for the entrepreneurs, but also for related businesses. 
  • Entrepreneurs also help drive change with innovation, where new and improved products enable new markets to be developed. Hence, diversity in products and service offered.
  • Entrepreneurship can boost can create employment in an economy.
  • Economy wise, higher earnings thanks to entrepreneurship can help boost national income and tax revenue. 
  • Entrepreneurs contribute in other ways as well, such as investing in community projects and supporting local charities. 

CXC POB Past Papers Answers ~ January 2016

– Question 4 –

Topics: Marketing, Marketing Mix, Public Relations and Social Media Marketing

(a) (i) Define the term ‘marketing’. (2 marks)

Marketing refers to everything that is done to get goods and services to the right people at the right time  and prices in the most efficient manner, while making a profit.

(ii) List the FOUR elements of the ‘marketing mix’. (4 marks)


The four elements of the marketing mix are:

  • Product
  • Price
  • Place
  • Promotion

Please note that practice makes perfect. This question was similar to that tested in May / June 2018 POB Past Paper Question No. 4. Hence, acquiring and doing other CXC POB Past Papers can definitely enhance your chances of passing.

(b) (i) State TWO reasons why firms engage in public relations (PR).’

  • It helps the firm build credibility and buildsor protect a brand.
  • Gain message clarity
  • Generate business leads.
  • Attracts business leads.
  • Recruit talents
  • Retains existing staff
  • Attract potential acquirers

(b) (ii) Describe THREE marketing methods, other than social media, employed by businesses to promote sales. (6 marks)

  • Advertising
  • Sales Promotion
  • Personal Selling
  • Public Relations

(c) Explain TWO ways in which businesses can use social media to promote sales. (6 marks)

  • Use of paid ads e.g facebook ads.
  • By using their facebook page to offer discounts through the promotion section.
  • Creating viral content which can increase brand awareness and sales.
  • Individuals could be ask to share post with promotion to get a discount or tag someone on fb, or even use a special hash tag within their status or pictures.

Question 5

Topics: Commercial Banks Services and Functions of the Central Bank

Functions of Commercial Banks

This particular question was similar to that of Question 4 which was examined in January 2019 CSEC POB Past Paper.

5 (a) (i) THREE services offered by Commercial Banks are:

Figure 7.0: Commercial Banks Services Principles of Business Blog https://principlesofbusiness.net
  • Accepting deposits
  • Providing loans and mortgages (real estate)
  • Cashing cheques
  • Offering money transfer services
  • Providing ATMs
  • Issuing credit/debit cards
  • Offering online banking services
  • Making payments on behalf of customers
  • Foreign exchange
  • Safety Deposit Boxes
  • Chequing Accounts, Savings Accounts, Fixed Deposit Accounts
  • Payments through cheques, debit cards, bank drafts, telegraphic transfers.

Functions of Central Banks Function

(ii) THREE Services of a Central Bank.

N.B. The Central Bank is the government’s bank.

  • Issue notes and coins.
  • Control of money supply.
  • Provide financial advice to government.
  • Act as bankers’ bank.
  • Serve as government’s banker.
  • Lender of last resort
  • Manages public debt.
  • Promotes financial stability.
  • Manages monetary policies.
  • Influences interest rate.
  • Issues Treasury Bonds.
  • Manages foreign exchange and golds reserve.
  • Provides financial and economic education.
  • Research, data collection and analysis.
  • Regulates commercial banks.

(b) Differentiate between a ‘current account’ and an ‘ordinary savings account’.


Source: (HDFC Bank, 2018)‌

  • Interest – Ordinary savings account earns interest whereas current accounts are non-interest bearing accounts.
  • Number of Transactions –Current Accounts are used for daily transactions while Ordinary savings accounts allows deposits with limited transactions.
  • Suitability Current Accounts are suitable for entrepreneurs who needs access to their account frequently. While, savings accounts are suitable for salaried persons.
  • Overdraft Facilities – Current Accounts are allowed overdraft facilities whereas savings accounts are not.
  • Minimum Balance- The minimum balance for a current account is much higher than that if a savings account.

(c) TWO ways in which technology has influenced banking and commerce are:

  • Internet Banking – check balances online
  • Mobile App and SMS text
  • Online payment portals – for websites
  • Wire Transfers – payment to suppliers for goods and services
  • Chip and Pin Technology Credit Card
  • POS Machines and ABM machines

(d) TWO ways a Central Bank can regulate the operations of a Commercial Bank are: (6 marks)

1) Open Market Operations

The open market operations is one of three traditional tools to conduct its monetary policy. The open market operations monetary policy utilised by the Central Bank involved the buying and selling of government bonds or securities to Commercial Banks to regulate the economy. For instance, if there is too much money in an economy or too many persons have easy access to credit or money or bank has loan interest and you borrow can lead to inflation.

In order to inject money into an economy , the Central Bank will buy the Treasury bills or the bonds will increase the money supply and credit becomes cheaper and easier. However, if the economy has too much inflation, the Central Bank will go to the open market and sell the bonds and this takes money out of circulation and decrease money supply and slows down the economy. For instance, within the U.S., the open market operations is seen when the Central Bank buys or sells U.S. Treasury bonds which influences the number of bank reserves as well as the interest rate levels.

2) Liquid-Asset Requirement

Commercial Banks must maintain a predetermined percentage of their total deposits and other liabilities in the form of liquid assets, which refers to the liquid asset requirement, or ratio. For instance, Central Bank may ask Commercial Banks to maintain 10% and reduce the amount of money available by banks to offer loans, hence interest rates go up na d the cost to borrow increases.

However, if the Central Bank reduces the amount of the liquid asset requirements to be held by Commercial Banks, then banks could lend more at lower interest rates.All licensed financial institutions are required to maintain a fraction of their deposit liabilities in a non-interest earning cash reserve account with the Bank.

Therefore, by lowering or increasing this fraction, the Bank can increase or reduce liquidity in the banking system.The Central Bank regularly monitors the cash balances of the banks and non-banks to ensure that these institutions meet their statutory requirements. There is a stipulated cash penalty for failure to adhere to the reserve requirements.

CXC POB Past Papers Answers ~ January 2016

– Question 6 –

Topics: Direct Taxation, Indirect Taxation, Reasons for Taxes, Proportional and Progressive Taxation.

This question was similar to Question No. 5January 2019 CSEC Principles of Business Past Paper.


(a) (i) TWO differences between ‘direct taxes’ and ‘indirect taxes’ are: (4 marks)

  • Direct Taxation is one where the incidence and the impact fall on the same people. Whereas, indirect taxation, the incidence and the impact falls on different people.
  • Direct Taxes are progressive whereas indirect taxes are regressive.
  • Direct Taxes are usually applied to income and capital and is paid by individuals. Whereas, Indirect Taxes, is levied on goods and services and is usually paid by the manufacturers or importers.
  • Direct taxes comes directly from income or value assets. Whereas, indirect taxes are levied on the consumption of goods.
  • The burden of direct taxes cannot be shifted. However, the burden of indirect taxes can be shifted.
  • Direct Taxes helps in reducing inflation, while Indirect Taxation can contribute to inflation.
  • Direct Taxes assist in the reducing the inequalities that are considered to be progressive. While, on the other hand , indirect taxes promotes inequalities and are considered more regressive (Bank Bazaar, 2016).


(a) (ii) ONE examples of : (2 marks)

Direct Taxes – Personal Income tax, Corporation Tax, Capital Gain Tax, Capital Transfer Tax .

Indirect Taxes – Customs duty, Excise Duty, Purchase Tax, Value Added Tax.

(b) (i) Outline THREE reasons why governments charge taxes are: (6 marks)

  • The major purpose government charge taxes is that they can fund their expenses incurred for education, healthcare, operating government business entities , etc.
  • To curb inflation by reducing the supply of money in the economy – controlling spending in an economy thus reduce inflation
  • To reduce pollution by taxing offending firms
  • To discourage unhealthy lifestyle e.g. a tax on cigarettes, alcohol
  • To protect local and infant industries by taxing imports – to remove competition from local goods in order to protect infant or fledgling industries by taxing imports at high rates.
  • To achieve greater equality of wealth and income.  Revenue from taxation is used to help the very poor e.g. providing food stamps.
  • To improve the balance of payments (BOP) by increasing the duties charged on imported goods.
  • To redistribute income through expenditure on social welfare programmes.


(b) (ii) Identify TWO sources of government revenue, other than taxes. (2 marks)

TWO sources of government revenue, other than taxes are:

  • Revenue gained from various services offered by the government such as the police and defence service (e.g. police issues tickets and fines) – fines, penalties and fees.
  • Another source of income can be from government owned entities or corporations. For instance in Trinidad and Tobago, examples are like WASA or even the Housing Development Corporation.
  • Dividends and profits earned from public sector companies – Investments.
  • Royalties



Figure 1.0: Graph highlighting Progressive, Proportional and Regressive Taxes

Source : (Illustratingmath.com, 2019)



(c) (i) Proportional Taxation

By using a proportional tax system, everyone pays the same percentage of taxes. Higher income earners would pay more because, with proportional taxes, everyone pays the same percentage in tax. However, higher income earners would pay more from their more substantial earnings than would lower income. 

(c) (ii) Progressive Tax

A progressive tax is designed to place the lightest burden on those who make the least money. Hence, the wealthy pay greater percentage of their income. The percentage of tax increases as income increases. The main reason in favor of a progressive tax system is to achieve fairness or equity in taxation, as those who are abler will pay more.

Stronger responses stated that as an individual’s income increases the taxes he/she pays increases and therefore the higher income earner would pay more totally, than the lower income earner.

CXC POB Past Papers Answers ~ January 2016

– Question 7 –

Topics: International Trade, Reasons for International Trade, Balance of Trade and Balance of Payment

Photo by Tom Fisk on Pexels.com

(a) (i) Define the term ‘international trade’.

International trade consists of exports and imports between countries, which should cause an improvement in people’s living standards through the principle of comparative advantage.

(ii) Outline THREE reasons why countries trade with each other.

THREE reasons why countries trade with each other are:

  • Lack of certain natural resources to produce essential goods. Oil which is important to economic life must be imported into countries that do not possess that natural resource.
  • Lack of capital, technology and specialist labour to manufacture certain goods on a large scale. For example, Caribbean countries import machinery equipment and vehicle.
  • Differences in climatic conditions, e.g. many tropical countries import grapes and strawberries as these produce need cool climates to survive.
  • Differences in the cost of production between countries.  This reason is based on the principle of comparative advantage which states that benefits will be gained from trade if countries produce goods in which they have a relative advantage. 
  • To earn foreign exchange to pay for imports.
  • Promotes necessary political connections between countries

(b) (i) Differentiate between ‘balance of trade’ and ‘balance of payments’. (4 marks)

The Balance of Trade also known as the ‘merchandise balance’  or the ‘visible balance’. It records transactions in  ‘visible exports’ and ‘visible imports’ and reflects whether or not a country is earning enough to spend or spending beyond its means.

The Balance of Payment is a record of the financial transactions between one country and its trading partners usually recorded over one calendar year. It shows whether the country made a profit or a loss.

(b) (ii) List TWO components of a balance of payment account. (2 marks)

TWO components of a balance of payment account are:

  • Current Account
  • Capital Account
  • Official Financing

(c) Explain TWO ways in which governments can address a balance of payment deficit.

TWO ways a government can address a balance of payment deficit are:

  • A balance of payments deficit can be financed by borrowing from international financial institutions such as the International Monetary Fund (IMF).
  • Also, the country can draw on its foreign currency reserves built up during periods of surplus on the current and capital accounts.

I challenge you to answer one entire CSEC CXC POB Past Paper per day for a month to make studying a habit and get familiar with the syllabus. Feel free to check out free CSEC POB Answers for January 2019 and June 2018. I look forward to hearing from you in the comment section below on how it went. Until the next blog post . . .  Happy Studying! P.S. Like and share this blog :).






Ayres, C. (2009). 16 Mixed Economy Advantages and Disadvantages. [online] Vittana.org. Available at: https://vittana.org/16-mixed-economy-advantages-and-disadvantages [Accessed 24 Jul. 2019].

Amadeo, K. (2012) 5 Traits of a Command Economy. [online] The Balance. Available at: https://www.thebalance.com/command-economy-characteristics-pros-cons-and-examples-3305585 [Accessed 24 Jul. 2019].

Amadeo, K (2018) 5 Traits of a Traditional Economy. [online] The Balance. Available at: https://www.thebalance.com/traditional-economy-definition-examples-pros-cons-3305587 [Accessed 24 Jul. 2019].

Bank Bazaar (2016) Difference between Direct and Indirect Taxes With Examples. Available at URL: https://www.bankbazaar.com/tax/difference-between-direct-tax-and-indirect-tax.html (Accessed: 22 July 2019)

Economics For You. (2019). Day 1 Concepts / Vocabulary. [online] Available at: http://econ4u.weebly.com/day-1-concepts–vocabulary.html [Accessed 26 Jul. 2019].

‌ pob 2016 moc cxc 16 Flashcards – Cram.com. https://www.cram.com/flashcards/pob-2016-moc-cxc-16-7234469

HDFC Bank (2018). Know the difference between a Current Account and Savings Account. [online] Hdfcbank.com. Available at: https://www.hdfcbank.com/personal/learning-center/save/current-account-vs-savings-account-know-the-difference [Accessed 23 Jul. 2019].

‌Which is the fairest way for income taxes? (n.d.). [online] Available at: https://www.lcps.org/cms/lib/VA01000195/Centricity/Domain/20739/Chapter%2012%20presentation.pdf.

Illustratingmath.com. (2019). Proportional Tax! – Students Illustrating Math. [online] Available at: http://students.illustratingmath.com/proportional-tax/ [Accessed 23 Jul. 2019].

Lombardo, C. (2017). 8 Advantages and Di?

Lumenlearning.com. (2019). Key Components of Communication | Organizational Behavior / Human Relations. [online] Available at: https://courses.lumenlearning.com/wmopen-organizationalbehavior/chapter/key-components-of-communication/ [Accessed 25 Jul. 2019].


1 thought on “JAN 2016 CXC POB Past Papers Answer”

  1. Hi hi these solutions have been a lifesaver. I am helping my nephew prep for exams next year do toy have any other years to share would appreciate greatly?


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