Friday, 19 July 2013

Islamic Economic System Questionnaire


Test your knowledge of the Islamic Economic System.

1) What is the view towards the private("free") market in Islam?

A) Exists but not open to all property types.
B) Does not exist.
C) Exists and open to all types of ownership.

2) What is the Islamic view on taxation?

A) There is no taxation.
B) There is taxation on wealth.
C) There is taxation based on income.

3) What is the Islamic view on inheritance?

A) There is no requirement to pass property to one’s spouse and offspring.
B) One can decide who to leave property to after ones death.
C) There are pre defined proportions according to which ones wealth is disseminated after death.
4) What is the currency model in Islam?

A) Paper and digital currency that is not backed by any real asset like all current world currencies(FIAT currency).
B) Currency that can exist in electronically, paper or physical form that is 100% backed by gold and silver.
C) Currency that is partially backed by gold and silver and partially exists as FIAT currency.

5) What is the Islamic view about continual growth?

A) The growth imperative is bad and rules seek to reduce growth or keep economic growth in line with population growth.
B) Growth is vital and growth must be maintained to avoid recessions and depressions.
C) There is no growth imperative and the economy adapt to a lack of growth without tail spinning into recession and rising unemployment.

6) How does the Islamic economic system view public utilities like gas, electricity and water?

A) These industries are available for private ownership and sale.
B) These industries are owned by all the public and administered by the state for the people.
C) These industries are owned by the government.
7) Does the Islamic economic system experience the boom and bust cycle?

A) The Islamic system experiences the business cycle as it is an inevitable part of private markets.
B) The economy may experience a substantial boom or a bust from time to time but there is no cyclical pattern to such events as seen in the capitalist system.
C) A boom or bust is not possible under the Islamic economic system which always experiences a steady state of growth.
8) Is inflation a problem in the Islamic economic system?

A) Inflation is never a problem as the currency is based on gold and silver and money printing beyond reserves is forbidden.
B) Inflation can occur based on a rise in the price of goods but not as a result of excessive money printing as all money must be backed by 100% gold and silver cover.
C) Inflation occurs in the Islamic economic system when goods and service production increases.

9) What is the liability model within Islamic companies?

A) An investor’s liability is limited to the property invested in the company.
B) An investors liability is not limited by the amount invested in the company but by the proportion of capital invested.
C) An investor is liable for settling liabilities in full from his or her own assets including the liabilities for other partners who have not fulfilled their obligations.
10) What is the fundamental economic problem according to the Islamic economic system?

A) Distribution of resources to ensure everyone has equal wealth.
B) Ensuring production is increased to ensure that limited resources can be allocated most efficiently to meet ever increasing human wants and needs.
C) The efficient allocation through a regulated private market to ensure wealth is adequately distributed to meet basic needs.

11) What is the view towards regulation in the Islamic economic system?

A) Regulation is bad and restricts the private sectors ability to generate wealth.
B) Regulation is necessary to ensure markets operate efficiently and to prevent exploitation and wealth circulating amongst an elite segment of society.
C) Regulation is vital for ensuring the market doesn’t allow for there to exist differences in wealth distribution.

12) Is it allowed to hoard money in the Islamic economic system?

A) Wealth including money is owned and the owner has the right to hoard it as a right of ownership.
B) Hoarding of wealth is not permitted under any circumstances.
C) Hoarding of money is not allowed unless it is being saved for an intended investment or consumption of a defined type or commodity within a predefined timescale.
13) If a trade occurs and the price agreed upon deviated significantly from the market price due to a lack of knowledge of the market price by either buyer or seller, the recourse is to:

A) Ask the trader that overcharged or underpriced to settle the difference.
B) Cancel the contract and for both parties to return their respective side of the contract.
C) Give the option to the defrauded party to cancel the contract and return both sides of the contracted considerations, or proceed with the trade but not settle the difference and keep the contract as it is.
14) Is it allowed to lease land for agricultural use?
A) The leasing of land for agriculture is haram.
B) The leasing of land for agriculture is allowed.
C) The rule depends on which crops are cultivated.

15) If a company partner dies, what happens to the company that the partner was a member of?
A) The company continues after the property of the deceased partner is disseminated to his or her relatives.
B) The company technically dissolves and the remaining partners may form another company with fresh terms to ensure there is no effective break in trading.
C) The company must terminate and the remaining partners are not permitted to continue the business.
16) In the mudaraba company structure, with its body partner(s) and capital partner(s), is the capital partner allowed to intervene in the day to day operation of the business?

A) The capital partner is allowed to intervene in the day to day running of the business as it is his/her capital that is being used.
B) The capital partner can set out his terms at the outset of the contract and must then not interfere with the operation of the business.
C) The capital partner is not allowed to specify his or her terms at the outset of the contract and is at the behest of the body partner who is responsible for all aspects of the operation of the business.

16) In the mudaraba company structure, with its body partner(s) and capital partner(s), is the capital partner allowed to intervene in the day to day operation of the business?

A) The capital partner is allowed to intervene in the day to day running of the business as it is his/her capital that is being used.
B) The capital partner can set out his terms at the outset of the contract and must then not interfere with the operation of the business.
C) The capital partner is not allowed to specify his or her terms at the outset of the contract and is at the behest of the body partner who is responsible for all aspects of the operation of the business.
17) Can Muslims buy shares in joint stock (plc) companies?

A) Islam encourages companies and trade through company structures and approves of becoming an owner in such joint stock companies.
B) Islam permits Muslims buying shares only in joint stock (plc) companies if the trade is in an ethical sector.
C) Islam forbids ownership in such companies due to the haram nature of the company structure.
18) Is interest (riba) permitted on paper currency in Islam as the evidence forbids riba on 6 items including gold and silver and doesnt mention paper currency which is not backed by gold and silver.

A) Interest is allowed on paper currencies but not allowed on currencies based on 100% backing of gold and silver.
B) Interest is allowed on paper currencies as long as it is not excessive such as the case with compound interest.
C) The reality of gold and silver is that of a medium of exchange and paper currencies through analogy satisfy as a medium of exchange and interest of any type is haram.

19) How to people wishing to invest do so in the absence of loan facilities available from private banks?

A) Investors need to find people to lend money without any interest for their business project.
B) Investors can ask people with money to join them to form a business and share in the profit and loss as an alternative to lending on interest.
C) Investors need to rely solely on savings to finance their business ambitions.
20) Is it allowed to hoard goods so that their prices increase with the intention to release the supply at a higher price to make more profit?

A) Hoarding goods for this purpose is not allowed.
B) Hoarding goods in this way is allowed as the trader has a right to sell and to time the manner in which he or she sells just as s/he has the right to never sell any goods or services at any time.
C) This is allowed if the aim is to pass the proceeds of the extra profit this activity generates to charity.
21) Will private banks exist in the Islamic economic system?

A) It depends on the type of bank. Retail banks which take deposits and lend on interest will not but investment banks helping companies make investment may exist.
B) All banking activities are haram and the only financial entity will be the state treasury the bait-ul-mal.
C) Banks belonging to foreign countries will be allowed to operate but Muslims will not be permitted to form such banks.

22) What is the rule regarding lost property?

A) Any lost property is the right of the one finding such property.
B) The rule of lost property depends on the amount found and the location of the find.
C) All lost property must be returned to its owner and only were this is not possible will it go to the government.
23) What does the Islamic economic system say about the division of labour, i.e. the idea that each person should focus on the work s/he is most efficient at to increase overall societal wealth?

A) It rejects this idea as an innovation of Adam Smith's classical economics and prefers keeping labour general at the individual level.
B) The Islam economic system acknowledges the concept of the division of labour as a self evident truth and necessity for wealth creation and is only averse to labour specialisation at the state level.
C) Production specialisation is key at both the individual and state level.

24) What does the Islamic economic system say about monopolies?
A) Monopolies are good as they help bring down prices due to true economies of scale.
B) Monopolies are not generally possible due to the limitations of scalability of Islamic company structures and most industries that lend to monopoly are not allowed for private enterprise.
C) Monopolies are possible and likely and the state does not interfere with them unless they charge unreasonable prices.

25) How does the Islamic economic system survive without conventional financial markets?

A) The lack of interest based finance severely limits the ability to raise capital for entrepreneurial pursuits and people have to try to borrow without interest or save to raise capital.
B) The focus on businesses is on intellectual capital and service industries not requiring physical capital.
C) The finance model is equity finance based instead of debt finance so financiers join into the business and share profit and loss and this, coupled with disincentives to hoard capital and lack of interest creates incentive for capital partners and those with business ideas to come together for business.
26) Do asset price bubbles, such as the housing bubble, form in the Islamic economic system?

A) Price bubbles are a symptom of speculation made possible by central banks creating money from nothing and lending at artificially low interest rates and this is not a reality in the Islamic economic system.
B) Price bubbles are only created when mischievous speculators seek to make short term profits in a private market and this could also happen in the Islamic economic system.
C) Price bubbles are a part of price discover and nothing to be concerned about.

27) Will there be consumer protection in the Islamic economic society?

A) Consumers are expected to look out for their own interests and once the sale is concluded, nothing can be done to reverse or rectify any fraudulence in trade.
B) There exists a specific judge called qadhi hisba who is responsible to make sure there is no cheating in the market and also products are for purpose and other judges to reverse injustice.
C) The mechanism to resolve disputes is for the defrauded party to create negative publicity against the fraudulent party and his activity helps protect consumer rights.

28) Are foreign companies allowed to operate within the Islamic economic system?

A) Foreign companies are allowed to operate freely within the Islamic economic society.
B) Foreign companies are not permitted to operate within the Islamic economic system but their goods, subject to certain conditions, may be imported and purchased within the Islamic society.
C) Foreign companies and foreign goods are not allowed to operate or be imported under any circumstances.

29) Are all products and services allowed to be traded within the Islamic economic system?

A) The Islamic economic system  allows all goods and services for which there is a demand and this is limited only by what society collectively deems to be harmful and abhorrent.
B) There is a classification of goods and services into basic, luxury and harmful goods and the 3rd category, which is defined through divine texts and through its reality, is banned in public markets despite their potentially existing demand by some.
C) All goods and services are permitted unless restricted by clear divine texts by name and description.

30) Market failure were private markets lead to sub optimal outcomes is minimised in the Islamic economic system through which means?

A) Government stimulus spending (fiscal policy) when markets are in recession and the private sector is contracting which makes up for the shortfall in demand
B) markets behave more efficiently due to factors such as government policy certainty, reliance of concepts like Rizq as opposed to 'animal spirits' reducing significantly the reliance on government meddling.
C) Market failure is treated by charity from those who have wealth towards those that suffer when markets and livelihoods decline.

































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