CBSE Sample Papers for Class 12 Economics Set 3 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Economics with Solutions Set 3 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Economics Set 3 with Solutions

Time Allowed: 3 Hours
Maximum Marks: 80

General Instructions:

1. This question paper contains two sections:
   Section A – Macro Economics
   Section B – Indian Economic Development
2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 80 words.
4. This paper contains 6 Short Answer Questions type questions of 4 marks each to be answered in 80 100 words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 150 words.

Section – A (40 Marks)
Macro Economics

Question 1.
Who regulates money supply in India? [1]
(a) Government of India
(b) Commercial banks
(c) Regional rural banks
(d) Reserve Bank of India
Answer:
(d) Reserve Bank of India

Explanation:
Money supply refers to the total stock of money of all types held by the people of a country at a given point of time. In India, money supply is regulated by the Reserve Bank of India, through various fiscal and monetary policies of the government.

Related Theory
The tools used by Reserve Bank of India to regulate money supply include:

1. Bank rate
2. Open market operations
3. Repo rate etc

Question 2.
From the given statements in Column I and II, choose the correct pair of statements. [1]
(Choose the correct alternative)

Column I	Column II
(1) Aggregate demand	(A) C + 1 + G + (X – M)
(II) Average propensity to save	(B) \(\frac{\mathrm{C}}{\mathrm{Y}}\)
(III) Marginal propensity to consume	(C) \(\frac{\mathrm{S}}{\mathrm{Y}}\)
(IV) Average propensity to consume	(D) \(\frac{\Delta C}{\Delta Y}\)

(a) (I)-A
(b) (II) – B
(c) (III) – C
(d) (IV) – D
OR
What type of relationship exists between the value of marginal propensity to save and investment multiplier?
(a) Direct
(b) Positive
(c) Inverse
(d) None of these
Answer:
(a) (I) – A

Explanation:
(1) Components of aggregate demand are: household consumption expenditure (C), investment expenditure (I), government consumption expenditure (G) and net exports (X – M).
(2) Average propensity to save is total savings (S) divided by income level (Y)
(3) Marginal propensity to consume is the change in consumption (AC). divided by change in income (AY)
(4) Average propensity to consume is total consumption expenditure (C) divided by income level (Y)

Related Theory
Aggregate demand: It is the total demand by domestic and foreign households and firms for an economy’s scarce resources, (ess the demand by domestic households and firms for resources from abroad.
Average propensity to save: Average propensity to save (APS) refers to the ratio of saving to the corresponding level of saving income.

Marginal propensity of consume: It is the proportion of change in consumption due to change in income.

Average propensity to consume: It is the amount of income the average consumer spends on goods and services.

OR

(c) Inverse
Explanation:
The value of multiplier and MPS are inversely related as multiplier is the reciprocal of MPS.
Multiplier (k) = \(\frac{1}{\text { MPS }}\)

Related Theory
There exists a direct relationship between MPC and the value of multiplier. Higher the MPC more will be the value of multiplier, and vice-versa.

Question 3.
In which year the Reserve bank of India was established? [1]
(a) 1936
(b) 1945
(c) 1935
(d) 1949
Answer:
(c) 1935

Explanation:
The Reserve Bank of India was established on April 1, 1935 in accordance with the RBI Act, 1934. The head office of Reserve bank is permanently situated in Mumbai since 1937.

Related Theory
The Reserve Bank of India (RBI) is India’s central bank, which controls the issue and supply of Indian rupee. RBI is the regulator of entire banking system in India.

Question 4.
The current account of Balance of Payment includes trade balance and ………………. [1]
(a) settlement account
(b) capital account
(c) invisibles
(d) error and omissions
Answer:
(c) invisibles

Explanation:
The current account of balance of payment include visible items (/.e. balance of trade), invisible items (i.e. export and imports of services) and unilateral transfers.

Related Theory
Capital account of balance of payments records all those transactions, between the residents of a country and the rest of world, which cause a change in the assets or liabilities of the residents of the country. It is related to claims and liabilities of financial nature.

Question 5.
Read the following statements – Assertion (A) and Reason (R). Choose one of the correct alternatives given below: [1]
Assertion (A): Wages received by an Indian working in the British Embassy in India will not be included while estimating Gross Domestic Product.
Reason (R): Wages received by an Indian working in British embassy in India is not a part of economic territory of India
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
OR
Read the following statements – Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Financial aids received from abroad after “Fani cyclone” is not included while estimating the value of GDP.
Reason (R): Financial aid is a factor income.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer:
(a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:
Wages received by an Indian working in British embassy in India is not a part of economic territory of India, as British Embassy is a part of Economic territory of Britain.

OR

(c) Assertion (A) is true, But Reason (R) is false.
Explanation:
Financial aid is a transfer income as no factor service is provided in return. Hence, it is not included while estimating the value of GDP.

Question 6.
Read the following statements – Assertion (A) and Reason (R). Choose one of the correct alternatives given below: [1]
Assertion (A): If an Indian buys a UK Car Company, it enters into a capital account as a debit item.
Reason (R): The sale of assets like the sale of shares of an Indian company to a Chinese customer is a credit item in the capital account.
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer:
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

Explanation:
Purchasing of share of a foreign company results in outflow of foreign exchange and will be recorded at the debit side of capital account. When foreign company purchases the shares of an Indian company it results in inflow of foreign exchange and recorded at credit side of Capital account. Purchasing and selling the shares results in the change of financial assets of a country thus transactions is of a capital nature.

Question 7.
The given diagram shows which economic theory concept? [1]

(a) Inflationary concept theory
(b) Deflationary concept theory
(c) Paradox of thrift theory
(d) None of the above
OR
Read the following statements carefully:
Statement I: MPS varies between 0 and infinity.
Statement II: Incremental income is either spent on consumption or saved for future use.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.
Answer:
(c) Paradox of thrift theory

Explanation:
The paradox of thrift is an economic theory that argues that personal savings can be detrimental to overall economic growth. It is based on a circular flow of the economy in which current spending drives future spending.

OR

(d) Statement 2 is true and Statement 1 is false

Question 8.
From the following data, identify the value of investment expenditure [1]

National income	1000
Marginal propensity to con­sume	0.20
Autonomous consumption ex­penditure	100

(a) 0.80
(b) 0.95
(c) 0.85
(d) 0.0085

OR

National Income	2000
Autonomous Consumption Expenditure	200
Investment Expenditure	100

Identify from the following data, the value of marginal propensity to consume will be ………………
(a) 0.80
(b) 0.95
(c) 0.85
(d) 0.0085
Answer:
(a) 100

Explanation:
Given,
Y= Rs. 1,000,
MPS = 0.20, C = Rs. 100, I = ? b or MPC = 1 – MPS
= 1 – 0.20 = 0.80
Y = C + I
or Y = C + bY + I
1.0 = 100 + 0.80 ×, 1,000 + I
I = 1,000 – 900
I = 100

OR

(c) 0.85
Explanation:
Given,
Y = Rs. 2,000, C = Rs.200, I = 100
We know, Y = C + I, C = C + bY
Y = C + bY + I
For calculating MPC, we use following equation
Y = C + bY + I
b = MPC
2.0 = 200 + 2,000b + 100
b = 2000-300/2000
= 1700/2000 = 0.85
Thus, MPC = 0.85

Related Theory
When the demand in an economy is less than the aggregate demand, the situation is called deficient demand leading to deflation.

Question 9.
Read the following statements carefully: [1]
Statement I: Consumption curve makes an intercept on the Y-axis, some point above the origin. Statement II: People need certain basic goods and services to sustain themselves, even if income is zero.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.
Answer:
(a) Both the statements are true.

Question 10.
Read the following statements carefully: [1]
Statement I: At the Break-Even point, consumption is equal to National Income.
Statement II: APC falls continuously with an increase in income as the proportion of income spent on consumption keeps on decreasing.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false
Answer:
(b) Both the statements are false.

Question 11.
“National income at constant prices presents a better view of the economic growth in comparison to national income at current prices”. Why? [3]
Answer:
National income at constant prices is the money value of final goods and services produced by normal residents of a country in a financial year, measured on the basis of base year price. It is also known as real national income and is affected by only one factor, namely, change in physical output whereas national income at current prices measure the value of goods and services at the prevailing prices in that particular year. It is also called nominal national income and is affected by two factors, namely, change in prices and change in output.

National income at current prices may show rise even without any change in output due to inflation or some other reasons and as such there is no actual economic growth. Hence, national income at constant prices presents a better view of economic growth as there is actual change in output.

Question 12.
In an economy, C = 200 + 0.5Y and I = ₹ 800 (where C = consumption expenditure, Y = income). Compute the following: [3]
(A) The equilibrium level of income
(B) Consumption expenditure at equilibrium level of income
OR
Suppose the consumption equals C = 40 + 0. 75Y, Investment (I) = ₹ 60 and Y = C + I Find:
(A) Equilibrium level of income
(B) The level of consumption at equilibrium
Answer:
(A) Given, I = ₹.800 and C = 200 + 0.5Y
Y = C + I
Y = (200 + 0.5Y) + 800
Y = 1000 + 0.5Y 0.5Y = 1000
Y = \(\frac{1000}{0.5}\)
Income (Y) = ₹ 2000

(B) Y = C + I
2000 = C + 800
– C = – 2000 + 800
Consumption Expenditure (C) is = ₹ 1200

OR

(A) Income(Y) = Consumption(C) + Investment(I)
We have C = 40 + 0.75Y and Investment (I) = ₹ 60
Substituting the value of C and I we get,
Y = 40 + 0.75Y + 60
Y – 0.75Y = 100
0.25Y = 100
Y = \(\frac{100}{0.25}\)
Y = ₹ 400

(B) The level of consumption at equilibrium:
Given, C = 40 + 0.75Y and Y = 400
C = 40 + 0.75 (400)
C = 40 + 300
C = ₹ 340

Question 13.
In what ways does the Reserve bank of India supervise the functioning of commercial banks? [4]
OR
“Reserve Bank of India recently reduced the repo rate to give a boost to the economy.” Explain the function performed by Reserve Bank of India.
Answer:
RBI supervises the functioning of commercial banks in the following manner:

1. The commercial banks are required to maintain a minimum cash balance out of the deposits they receive.
2. The RBI monitors that the banks are actually maintaining the cash balance or not.
3. The RBI sees that the banks give loans not just to profit making businesses and traders but also to small cultivators, small borrowers and small-scale industries etc.
4. Periodically, bank have to submit information to the RBI about how much they are lending, to whom , at what interest rate etc.

OR
Repo rate is the rate at which central bank i.e. Reserve Bank of India, lends money to commercial banks. A reduction in repo rate is aimed at bringing growth and improving economic development in the country. This is the controller of credit function performed by the Reserve Bank of India.

Central bank adopts bank rate policy as a quantitative technique to control credit in an economy. Repo rate is the rate at which commercial banks can borrow funds from central bank. This increases the liquidity available with the commercial banks and it can provide more credit in the form of loans and advances to the people. This increase the money supply in the economy resulting in higher aggregate demand. The increased demand increases the GDP and boost the economy.

Question 14.
Distinguish between devaluation and depreciation of domestic currency. [4]
Answer:
When Government or authorities reduce the price of domestic currency in terms of all foreign currencies, it is called devaluation. Devaluation occurs when a country makes a conscious decision to lower its exchange rate in a fixed or semi-fixed exchange rate. Technically, devaluation is only possible if a country is a member of some fixed exchange rate policy. Depreciation is when there is a fall in the value of a currency in a floating exchange rate. This is not due to a government’s decision, but due to supply and demand-side factors.

Question 15.
In an economy, planned savings exceed planned investment. How will equality between the two be achieved? Explain. [4]
Answer:
The equilibrium level of income in an economy can be established by the equality between planned savings and planned investment. When planned savings is more than planned investment, then the planned inventory would fall below the desired level. To bring back the inventory at the desired level, the producers expand the output. More output means more income. This is derived by the AD – AS approach itself
AD = AS
C + I = C + S
(Planned) I = S (Planned)
The equilibrium can better be understood by the following diagram: .

From the diagram below, If S > I i.e., level of National income is at OY₂. But increase in savings as compared to investment will result in decrease in production, income and employment in the economy. This will bring the income at equilibrium level i.e. where AD = (C+ I) i.e. at OY level of income.

Moreover, if S < I i.e., level of National income is at OY₁. This will result in increase in income, output level is reached i.e. OY level of income where AS = Y

Question 16.
“Proportional income tax act as an automatic stabiliser in the economy”. Discuss. [6]
Answer:
A cut in taxes increases disposable income at each level of income. A realistic assumption is that the government collects a constant fraction of income in the form of taxes. Proportional taxes not only lower consumption at each level of income but also lower the slope of the consumption function.

Automatic stabilisers are any part of the government budget that offsets fluctuations in aggregate demand. They offset fluctuations in demand by reducing taxes and increasing government spending during a recession, and they do the opposite in expansion. The best known automatic stabilisers are Proportional income taxes. Automatic stabilisers are so called because they act to stabilise economic cycles and are automatically trigerred without additional government action.

The progressive income tax acts as an automatic stabiliser, a shock absorber, because it makes disposable income and thus, consumer spending less sensitive to fluctuations in GDP. When GDP rises, disposable income also rises but by less than the rise in GDP because a part of it is siphoned off as taxes. This helps limit the upward fluctuation in consumption spending. During a recession when GDP falls, disposable income falls less sharply, and consumption does not drop as much as it otherwise would have fallen had the tax liability been fixed.

This reduces the fall in aggregate demand and stabilises the economy.

Fiscal policy instruments can be varied to offset the effects of undesirable shifts in investment demand i.e. if investment falls, government spending can be raised so that autonomous expenditure and equilibrium income remain the same. This deliberate action to stabilise the economy is referred to as discretionary fiscal policy to distinguish it from the inherent automatic stabilising proportional of the fiscal system. Hence, proportional income taxes help to stabilise the economy against upward and downward movements.

Question 17.
Calculate (A) Net National Product at factor Cost and (B) Gross national disposable income from the following data:

S. No	Particulars	₹ (in crores)
0)	Personal tax	100
(ii)	Savings of Non-departmental enterprises	80
(iii)	National debt interest	20
(iv)	Corporation tax	40
(v)	Income from property and entrepreneurship accruing to the Government Administrative Departments	70
(Vi)	Retained earnings of private sector	10
(vii)	Current transfer payments by government	40
(viii)	Depreciation	60
(ix)	NIT	100
(x)	Net current transfers from rest of the world	(-)10
(xi)	Personal disposable income	500
(xii)	Net factor income to abroad	(-)10

Answer:
A) For calculating NNP_FC
First we have to calculate income accruing to private sector
So, Income accruing to private sector = Personal disposable income + Personal Tax + Retained earnings of private sector + Corporation tax – National Debt interest – Current transfer payments by Government – Net current transfers from rest of the world + Net factor income to abroad
= 500 + 100 + 10 + 40 – 20 – 40 – (-10) + (-10)
= ₹ 590 Crores
Now,
NDPFC = Income accruing to private sector + Savings of Non-departmental enterprises + Income from property and entrepreneurship accruing to the Government administrative departments
= 590 + 80 + 70
= ₹ 740 Crores
NNP_FC = NDP_FC – Net factor income to abroad
= 740 – (-10)
= ₹ 750 Crores

(B) Gross national disposable income = NNP_FC + Net indirect Tax + Net current transfers from rest of the world + Depreciation
= 750 + 100 + (-10) + 60
= ₹ 900 Crores

Section – B (40 Marks)
Indian Economic Development

Question 18.
…………….. policy has been adopted by India for economic development since 1991. [1]
(Choose the correct alternative)
(a) Liberal
(b) Restrictive
(c) Strict
(d) Normal
OR
Uncertainty of income for farmers in India is majorly caused by ………………..
(Fill in the blank with correct alternative)
(a) irregular rainfall
(b) unavailability of loans
(c) smallholdings
(d) high rate of interest on loans
Answer:
(a) Liberal

Explanation:
India’s New Economic Policy was announced on July 24, 1991 known as the LPG or Liberalisation, Privatisation and Globalisation model.

Related Theory
The new Economic Policy (NEP), 1991 of India consisted of wide ranging economic reforms. The thrust of the policies was towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms.

OR

(a) irregular rainfall
Explanation:
Due to lack of irrigation facilities, the farmers in India are mostly dependent on rainfalL The irregular rainfall causes uncertainly of income.

Question 19.
The reason behind implementing the economic reforms in India in 1991 was ………………. [1]
(a) directions from the World Bank
(b) failure of the economic policies of the existing government
(c) declining foreign exchange reserves
(d) none of the above
OR
In …………… the Karve committee noted the possibility of using small scale industries for promoting rural development.
(a) 1944
(b) 1951
(c) 1955
(d) 1953
Answer:
(c) declining foreign exchange reserves

Explanation:
India’s foreign exchange reserves were at $1.2 billion in January 1991 and ‘ depleted by half by June, barely enough to last for roughly 3 weeks of essential imports.

OR

(c)1955
Explanation:
Karve committee was constituted in 1955 by the Planning commission for the growth and development of small scale industries and rural development. It was also called village and small scale industries committee.

Related Theory
Industrial Policy Resolution was adopted in 1956 in accordance with the goal of the state controlling the economy and this formed the basis of second five year plan.

Question 20.
Read the following statement – Assertion (A) and Reason (R) Choose one of the correct alternatives given below: [1]
Assertion (A): In India, the service sector has shown significant growth in participation of work force from 1972-73 to 2011-12.
Reason (R): Service sector is the only organised sector in the economy so the government spends a lot of money for creating jobs in service sector.
Alternatives:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true but Reason (R) is false
(d) Assertion (A) is false but Reason (R) is true
Answer:
(c) Assertion (A) is true, but Reason (R) is false.

Explanation:
There are several reasons for increased production in service sector such as increase in demand for education, health, communication and transporation, development for information and technology sector.

Question 21.
Read the following statement – Assertion (A) and Reason (R) Choose one of the correct alternatives given below: [1]
Assertion (A): World Trade Organisation (WTO) was founded in 1995 as the successor organisation to the General Agreement on Trade and Tariff (GATT).
Reason (R): There was a need to establish a rule based trading regime in which nations cannot place arbitrary restrictions on trade.
Alternatives:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(c) Assertion (A) is true but Reason (R) is false.
(d) Assertion (A) is false but Reason (R) is true.
Answer:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Explanation:
World Trade Organisation (WTO) was established to administer all multi lateral trade agreements by providing equal opportunities to all countries in international market for trading purposes.

Question 22.
Arrange the following events of China in chronological order and choose the correct alternative. [1]
(I) Great Proletarian Cultural Revolution
(II) One child norm
(III) China’s rapid industrial growth
(IV) Great leap forward Alternatives:
(a) (I), (II), (III), (IV)
(b) (II), (III), (IV), (I)
(c) (IV), (I), (III), (II)
(d) (IV), (III), (II), (I)
Answer:
(c) (IV), (I), (III), (II)

Explanation:
In China, the Great Leap Forward movement started in 1958. The Great Proletarian Cultural Revolution was started in 1966. The China’s rapid industrial growth was started in 1978 followed by One child norm or policy in 1979.

Question 23.
Which country has the highest per capita income? [1]
(a) China
(b) India
(c) Pakistan
(d) Nepal
Answer:
(a) China

Explanation:
According to 2017 database, China has the highest per capita income compared to Pakistan, India, and Nepal.

Related Theory
China has the second largest GDP in the world. India’s GDP is about 40 percent of China’s GDP and Pakistan’s GDP is about 12 percent of India’s GDP.

Question 24.
Read the following statements carefully and choose the correct alternatives given below: [1]
Statement 1: Economists identify the poor on the basis of their occupation and ownership of assets.
Statement 2: The poor people possess few assets and reside in kutcha hutments.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 is false.
(d) Statement 2 is true and Statement 1 is false.
Answer:
(a) Both the statements are true.

Question 25.
Read the following statements carefully and choose the correct alternative from the following: [1]
Statement 1: Liberalization was introduced to put an end to the restrictions and open various sectors of the economy.
Statement 2: The only industries which are now reserved for the public sector are a part of atomic energy generation and some core activities in railway transport.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true and Statement 2 m is false.
(d) Statement 2 is true and Statement 1 is false.
Answer:
(b) Both the statements are false.

Question 26.
Green revolution increased the use of: [1]
(a) Improved seeds
(b) Irrigation
(c) Chemical fertilizers
(d) All of these
Answer:
(d) All of these

Question 27.
What kind of Tax is GST? [1]
(a) Direct Tax
(b) Indirect Tax
(c) Depends on the type of goods and services
(d) None of these
Answer:
(b) Indirect tax

Question 28.
“Privatisation in its purest sense and lexically means de-nationalization i.e., transfer of the state ownership of the assets to the private sector to the tune of 100%”. Comment. [3]
OR
“Economic reforms were mainly intended to remove the bottlenecks which acted as obstacles to industrial growth”. In light of the above statement, discuss the impact of economic reforms introduced in 1991.
Answer:
Privatisation implies shedding of the management or ownership of a government owned enterprise. Privatisation of the public sector enterprises by selling off the equity is known as disinvestment. Privatisation means de-nationalisation as the transfer of ownership of assets reduces the control of government over these assets and the same are transferred from public sector to private sector. Disinvestment is the 100% transfer of the state owned enterprises to the private sector.

OR

Theindustrialgrowthin India was not satisfactory after the independence. Before the introduction of economic reforms in 1991, the growth was far below the target and not even equal to the performance of 1980s. The economic reforms of 1991 aimed at rapid industrialisation. The policy sought substantially to deregulate industry so as to promote growth of a more efficient and competitive industrial economy.

Industrial licensing was abolished for all industries except in 18 industries. The Monopolies and Restrictive Trade Practices (MRTP) Act was repealed to eliminate the need for prior approval for capacity expansion and diversification. Areas reserved for the public sector were narrowed down and greater participation by private sector was permitted. The policy encouraged disinvestment of government holdings.

Question 29.
Interpret the given picture and state its three advantages. [3]

Answer:
The benefits of organic farming are many but three of them are as follows:

1. Environment-friendly: The farming of organic products is free ofchemicals and fertilisers, so it does not harm the environment.
2. Economical: In organic, farming, no expensive fertilisers, pesticides, orHYV seeds are required for the plantation of crops. Therefore, there is no extra expense.
3. High demand: There is a huge demand for organic products in India and across the globe, which generates more income through export.

Question 30.
“Self-Help Groups have emerged to fill the gap in the formal credit system”. In light of the above statement, discuss the importance of Self-Help Groups in rural areas. [4]
Answer:
Self-Help Groups have emerged to fill the gap in the formal credit system because the formal credit delivery system has not only proven inadequate but also not been fully integrated into the rural and community development. Due to the demand of some kind of collateral, vast proportion of poor rural households were automatically out of this credit regime.

SHGs promote thrift in small proportions by a minimum contribution from each member. Out of this pooled money, credit is given to the deprived members repayable in small installments at reasonable interest rates. Such credit provisions are referred to as micro-credit programmes. SHGs have also helped in the empowerment of women.

Question 31.
Compare and contrast India and China’s sectoral contribution towards GDP in 2003. What does it indicate? [4]

Sectors	Contribution to GDP (in %) (2003)
	India	China
Primary (Agriculture)	23	15
Secondary (Industry)	26	53
Tertiary (Service)	51	32

Answer:
The comparison of India’s and China’s sectoral contribution towards their respective GDP can be done with the help of the given data:

1. Contribution of primary sector to GDP: The data above reveals that the contribution of the primary sector to India’s GDP is 23% compared to 15% of China’s GDP. This confirms the agrarian nature of Indian economy.
2. Contribution of secondary sector to GDP: The data also reveals that China has comparatively a strong industrial base as compared to India. The contribution of secondary sector to China’s GDP is 53% against the contribution of mere 26% to India’s GDP. From this, we can infer that India’s industrial sector is far behind that of China.
3. Contribution of tertiary sector to GDP: We can also analyse that although India’s industrial sector is’ not as strong as that of China yet the contribution of India’s service sector is much stronger than that of China.

Thus, after analysing the above data helps us to conclude that a significant portion of India’s GDP is contributed by tertiary sector followed by its agriculture sector. On the contrary, the major contributor to China’s GDP is the secondary sector followed by its tertiary sector.

Question 32.
You and your friends are making a project on the topic of “Key issues in Rural development.” Your findings indicate that rural development is necessary not only for the development of a nation but also for livelihood of rural people. Discuss the objectives and key issues in rural development. [4]
OR
Bring out the differences between human capital and human development.
Answer:
The objective of rural development are:

1. Increasing productivity of agricultural sector.
2. Generating alternative means of livelihood in rural sector.
3. Promoting education and health facilities in the rural areas.

There are some key issues in rural development

1. A system of marketing that ensures remunerative price to the farmer for his produce.
2. Diversification of production activity with a view to find alternative means of sustainable living other than crop-cultivation.
3. Honest system of land reforms.
4. Development of human resources like health, addressing both sanitation and public health.
5. Development of infrastructure like electricity, irrigation, transport facility etc.

OR

(1) Human capital and human development are interrelated concepts but they are not identical. Human capital states education and health as a means to increase labour productivity whereas human development is the overall process of widening human’s skills and giving them the opportunity to grow, whether in an organisation or at a personal level

(2) Human capital considers education and health as a means (skills and expertise) to enhance productive capacity, whereas on the other hand human development considers human beings as end in itself.

(3) Human capital is a narrow concept whereas human development is a broader concept.

(4) Human capital considers that investment in education and health is unproductive if It does not increase the output of goods and services, whereas human development occurs when majority of people in the economy are educated and healthy.

Question 33.
Explain the benefits of Goods and Services Tax (GST). [6]
Answer:
The benefits are Goods and Services Tax (GST) are as follows:
(1) Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business.

(2) Removal of cascading effect: A system of seamless tax-credits throughout the value- chain, and across boundaries of states, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.

(3) Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.

(4) Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.

(5) Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services.

(6) Relief in overall tax burden: Because of efficiency gains and prevention of leakages, the overall tax burden on most of the commodities will come down, which will benefit consumers.

Question 34.
Read the following case carefully given below: [6]
Triple Wins for Sustainable Development
Sustainable development is the synonymous in the minds of many with the colour green and for good reasons. Twenty years ago, at the First Earth Summit at Rio de Janerio, in Brazil, world leaders set out what today is conventional wisdom: SOCIAL AND ECONOMIC HUMAN PROGRESS – cannot be divorced from environmental protection unless both are advanced together, both will flounder together.

Sustainable development is as much about health, education and jobs, as it is about the ecosystems. It is about ever widening inclusion and movement away from decisions that erode democratic space and do not address social inequality, intolerance, and violence.

Sustainable Development is about changes that transform impoverished people, communities, and countries into informed, educated healthy and productive societies. It is about wealth creation that generates equality and opportunity. Sustainable Development is about consumption and production patterns that respect planetary boundaries; it is also about increasing tolerance and respect for human rights at all levels.

Building on human development legacy that oriented with Economists like Amartya Sen and MahbubUlHaq and was captured by the first Human Development Report in 1990. United Nations Development Programme (UNDP) has long promoted alternative approaches to measure human progress, along with the Human Development Index (HDI).

Today, we are building on this legacy by exploring how to adjust the index to reflect environmental sustainability, so that governments and citizens might better track real progress towards truly sustainable development This must be our collective objective.
(A) “Sustainable development is all about ecosystem only.” Defend or refute the statement with valid argument.
(B) As per the above text, which must be our collective objective?
Answer:
(A) The statement is refuted as sustainable development is as much about health, education and jobs, as it is about the ecosystems. Sustainable Development is about changes that transform impoverished people, communities, and countries into informed, educated healthy and productive societies. It is about wealth creation that generates equality and opportunity. Sustainable Development is about consumption and production patterns that respect planetary boundaries; it is also about increasing tolerance and respect for human rights at all levels.

(B) Today, we are building on this Legacy by exploring how to adjust the index to reflect environmental sustainability, so that governments and citizens might better track real progress towards truly sustainable development. This must be our collective objective.