Students must start practicing the questions from CBSE Sample Papers for Class 12 Economics with Solutions Set 4 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Economics Set 4 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.
Suraj has deposited his money with the bank. He is in urgent need of money and goes to bank and withdraws his money by cheque. What type of deposit he is having with the bank? [1]
(a) Fixed Deposit
(b) Term Deposit
(c) Demand Deposit
(d) Recurring Deposit
Answer:
(c) Demand Deposit

Explanation:
Demand deposits are those deposits with bank which can be withdrawn by the depositor at any time without any prior information to the bank.

Related Theory
Fixed deposits and term deposits are those deposits with the bank which can only be withdrawn on their maturity. These deposits are made for a particular period of time.

Recurring deposits are those deposits in which the depositor deposits a fixed amount at regular periods. These can also be withdrawn only on maturity.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 2.
Though there is no change in the demand of foreign currency, the supply of foreign exchange increases leading to foil in the exchange rate. It implies that there is: [1]
(a) Appreciation of domestic currency
(b) Depreciation of domestic currency
(c) No change in domestic currency
(d) None of these
OR
Sale of machinery to abroad is recorded as ………………… item in the……………………… account of balance of payments.
(a) positive, capital
(b) positive, current
(c) negative, capital
(d) negative, current
Answer:
(a) Appreciation of domestic currency

Explanation:
Appreciation of domestic currency means an increase in the value of one currency in relation to another. It leads to rise in imports.

Related Theory
Depreciation of domestic currency is the rise in the exchange rate leading to rise in exports.

OR

(b) positive, current
Explanation:
Current account of balance of payments records all the transactions related to export and imports of goods and services end unilateral transfers. Those items that result in inflow of foreign exchange are recorded as positive item in the current account of balance of payments. Sale of machinery to abroad is an export and as such results in inflow of foreign currency. Thus, it will be recorded as positive item in the current account of balance of payments.

Related Theory
Capital account of balance of payments records all those transactions, between the residents of a country and rest of the world, which can cause a change in assets and liabilities of the residents of a country or its residents.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 3.
From the set of statements given in Column I and II, choose the correct pair of statements: [1]

Column I Column II
(A) Dirty floating (i) Managed floating rate system
(B) Includes only visible items (ii) Depreciation
(C) Unilateral transfers (iii) Balance of trade
(D) Fall in value of domestic currency in relation to a foreign currency (iv) Current account of BOP

(a) A – (i)
(b) B – (ii)
(c) C – (iii)
(d) D – (iv)
Answer:
(a) A – (i)

Explanation:
Managed floating rate system is also known as dirty floating. Under this system, Central bank intervene to buy and sell foreign currencies is an attempt to moderate exchange rate movements.

Related Theory
Balance of trade is the difference between export and import of goods and includes only visible items. Unilateral transfers include gifts, donations, personal remittances, among residents of two countries and it is a component of current account of balance of payments.

Question 4.
…………………….. deficit refers to the excess of government revenue expenditure over revenue receipts. [1]
(Choose the correct alternative)
(a) Primary
(b) Fiscal
(c) Revenue
(d) Borrowing
Answer:
(c) Revenue

Explanation:
Revenue deficit includes only such transactions that affect the revenue income and expenditure of the government.

Related Theory
Fiscal deficit is the difference between the government’s total expenditure and its total receipts excluding borrowings. It reflects the borrowing requirements of the government Primary deficit is the fiscal deficit minus interest payments. It is the borrowing on account of current expenditures exceeding revenues.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 5.
Read the following Statement-Assertion (A) arid Reason (R): Choose one of the correct alternatives given below: [1]

Assertion (A): Reserve bank of India constantly regulates the supply of money.
Reason(R): A central bank can undertake actions that follow an expansionary or contractionary policy through monetary policy.
(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 Statement-Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Central Banks lower the Cash Reserve Ratio to increase the money supply.
Reason (R): The Central uses the reserve ratio as one of its key monetary policy tools.
(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:
A central bank reguLates the level of money supply within a country. Through monetary policy, a central bank can undertake actions that follow an expansionary or contractionary policy. .

OR

(c) Assertion (A) is true, But Reason (R) is false.
Explanation:
Central Banks lower the Cash Reserve Ratio to increase the money supply as it increases the lending power of the commercial banks, which in turn increases the money supply in an economy.

Question 6.
Read the following Statement-Assertion (A) and Reason (R). Choose one of the correct alternatives given below: [1]
Assertion (A): When a government spends more than it collects by way of revenue, it incurs a budget deficit.
Reason (R): There are various measures that capture government deficit and they have their own implications for the economy.
(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:
A budget deficit occurs when a government spends more in a given year than it collects in revenues, such as taxes.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 7.
Choose the correct alternative from the following data in terms of preIndependence Indian economy and that of right after we attained independence:  [1]

Statement 1: There was shortage of capital with the private sector.
Statement 2: There was low level of demand for industrial goods because of limited size of the market.
Alternatives:
(a) Statement 1 is true but Statement 2 is false.
(b) Statement 1 is false but Statement 2 is true.
(c) Both the statements are true.
(d) Both the statements are false.
Answer:
(b) Both the statements are false

Explanation:
There wasn’t enough capital to fulfill the capital requirement of the private sector. The demand for industrial goods was also low due to the limited size of the market.

Question 8.
Read the following statements carefully and choose the correct alternative from the following: [1]

Statement 1: Speculative demand for money is inversely related to the rate of interest.
Statement 2: Different people have different expectations regarding the future movements in the market rate of interest based on their private information regarding the economy.
Alternatives:
(a) Statement 1 is true and Statement 2 is false.
(b) Statement 2 is true and Statement 1 is false.
(c) Both the statements are true.
(d) Both the statements are false.
Answer:
(a) Both the statements are true.

Explanation:
When the interest rate is very high everyone expects it to fall in future and hence anticipates capital gains from bond-holding. Hence people convert their money into bonds. Thus, speculative demand for money is low. When interest rate comes down, more and more people expect it to rise in the future and anticipate capital loss. Thus they convert their bonds into money giving rise to a high speculative demand for money.
CBSE Sample Papers for Class 12 Economics Set 4 with Solutions 1

Question 9.
Name the services provided by the entity in the given picture.
CBSE Sample Papers for Class 12 Economics Set 4 with Solutions 2
(a) Foreign exchange
(b) Courier servise
(c) Education
(d) None of the above
Answer:
(a) Foreign exchange

Explanation:
The major participants in the foreign exchange market are commercial banks, foreign exchange brokers and other authorised dealers and monetary authorities. Although participants themselves may have their own trading centres like Western Union , the market itself is worldwide.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 10.
Find the current account balance from the following data : [1]

Items (Rs.in crore)
Exports 250
Imports 300
Non factor services 200
Unilateral transfer 150
Income 100

(a) ₹ 50 crores
(b) ₹ 450 crores
(c) ₹ 400 crores
(d) ₹ 530 crores
OR
Suppose, following data is presented, for an imaginary economy:

Year Visible Exports Visible Imports
1990 300 260
2000 400 320

Identify, the position of Indian economy from 1990 to 2000?
(a) Deterioration of balance of trade
(b) Increase in trade deficit
(c) Improvement in balance in invisibles items
(d) Improvement in balance of trade
Answer:
(c) ₹ 400 crores

Explanation:
Trade balance: Exports – Imports
= ₹ 250 crores – ₹300 crores
= (-) ₹ 50 crores
Invisible Balances = Balance on non-factor services + Balance on income + Balance on unilateral transfers
= ₹ 200 crores + ₹ 100 crores + ₹ 150 crores = ₹ 450 crores
Current Account Balance = Trade balance + Invisibles balance
= (-) ₹ 50 crores + ₹ 450 crores = ₹ 400 crores

OR

(d) Improvement in balance of trade
Explanation:
(1) In 1990,
BOT = Visible Exports – Visible Imports
= 300 – 260 = 40
(2) In 2000,
BOT = Visible Exports – Visible Imports
= 400-320 = 80
(3) In 10 years, BOT has improved from 40 to 80

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 11.
Briefly state the concept of consumption function. Explain with schedule and diagram. [3]
Answer:
The relationship between the consumption expenditure and the income is known as consumption function. The consumption function can be expressed, mathematically as C = \(\overline{\mathrm{C}}\) + bY Where \(\overline{\mathrm{C}}\) is consumption expenditure, C is autonomous consumption i.e., consumption at zero level of income, b is marginal propensity to consume and Y is income.

Consumption function can be explained with the help of schedule and diagram:

Inc­ome Con­sum­ption APC ΔC ΔY MPC
(Y) (C) \(\left(\frac{C}{Y}\right)\) \(\left(\frac{\Delta C}{\Delta Y}\right)\)
0 100
100 170 1.7 70 100 0.7
200 240 1.2 70 100 0.7
300 310 1.33 70 100 0.7
400 380 0.95 70 100 0.7
500 450 0.90 70 100 0.7

A consumption function curve indicating C = \(\overline{\mathrm{C}}\) + bY is drawn in the figure.
CBSE Sample Papers for Class 12 Economics Set 4 with Solutions 6

  1. The consumption curve starts from a positive point R which indicates that even when income is zero, consumption expenditure equal to OR is incurred from past savings. Thus, OR represents autonomous consumption (\(\overline{\mathrm{C}}\)).
  2. Consumption curve slope upwards which shows direct relationship i.e., when income increases, consumption expenditure also increases but in lesser proportion.
  3. The rising slope of consumption curve is b (i.e. MPC = ∆C/∆Y)
  4. Since slope of curve is constant, we get a straight line consumption curve.

Question 12.
State, giving reasons, whether the following statements are true or false: [3]
(A) When investment multiplier is 1, the value of marginal propensity to consume is zero.
(B) The value of marginal propensity to save can never be negative.
OR
Calculate marginal propensity to save and marginal propensity to consume from the following data:

Year Income (₹) Consumption Expenditure (₹)
2018 20,000 6,000
2019 28,000 10,000

Answer:
(A) True. When investment multiplier is 1, the value of marginal propensity to consume is zero.

Reason:
Investment multiplier refers to the number of times by which the increase in output or income exceeds the increase in investment. The equation for calculating investment multiplier is: k = ∆Y / ∆l
Where k stands for investment multiplier
∆Y is the change in income
∆l is the change in investment
Alternatively, k = \(\frac{1}{1-\mathrm{MPC}}\)
Substituting the value of k, we get
1 = \(\frac{1}{1-\mathrm{MPC}}\)
1 – MPC = 1
MPC = 1 – 1 = 0
Therefore, when investment multiplier is 1, marginal propensity to consume is zero.

(B) True. The value of marginal propensity to save can never be negative.

Reason:
Marginal propensity to save (MPS) cannot be less than zero as it is the percentage change in saving when there is some change in the level of income which cannot be less than the change in savings. An individual may at the most spend the entire change in income so that change in saving’ can be zero but not less than that. Therefore, it cannot be negative.

OR

Marginal Propensity to Save (MPS) = ∆S / ∆Y where, ∆S is Change in saving, and ∆Y is change in income
Saving = Income – Consumption expenditure Substituting the values in the equation, we get
∆S = New saving – initial saving
= (28,000 – 10,000) – (20,000 – 6,000)
= 18,000 – 14,000 = ₹ 4,000
∆Y = New income – initial income
= 28,000 – 20,000
= ₹ 8,000
Therefore, MPS = ∆S / ∆Y
= 4,000/8,000 = 0.5
Marginal Propensity to Consume (MPC) = ∆C/∆Y
where ∆C is the change in consumption expenditure and ∆Y is change in income
MPC = (10,000 – 6,000)/(28,000 – 20,000)
= 4,000/8,000 = 0.5

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 13.
“The Reserve Bank of India (RBI) said, it is ready to provide liquidity to ailing Indianprivate lender, Yes Bank, if needed”. [4]
-Reuters
In view of the above statement, discuss the function performed by the Reserve Bank of India.
OR
“The central bank manages the cash reserves and demand deposits of governments in current accounts.” Discuss the function of central bank indicated here.
Answer:
Recently, Yes Bank, an Indian private sector bank, had undergone severe finance crisis due to lack of liquidity. Reserve Bank of India, as a “lender of last resort” came forward to rescue the bank by providing liquidity to ailing bank.

As a banker’s bank, the Reserve Bank of India performs the function of lender of last resort to commercial banks. It comes up with granting credit to the banks that are facing temporary liquidity problems by supplying much needed liquidity to them. This role of Reserve Bank of India saves the commercial banks from bankruptcy.

OR

The function of the central bank which is indicated in the question is Banker to the government.

The Central bank acts as a banker to both Central and State governments. It provides them the short term loans whenever necessary and also manages the public debt of the country. It transacts all banking business of the government which involves receipts and payments of money on behalf of the government and carrying on other banking transactions. It is also responsible for advising the government on banking and financial issues.

Question 14.
Explain the merits and demerits of fixed foreign exchange rate system. [4]
Answer:
A fixed exchange rate system is a system in which the Government fixes the exchange rate at a particular level. The government or central bank ties the country’s official exchange rate to another country’s currency.
The merits of fixed foreign exchange system are:

  1. Fixed exchange rate prevents the member countries from the economic fluctuations which can weaken the economic policies.
  2. It promotes capital movements. Fixed exchange rate system attracts foreign capital because a stable currency does not involve any uncertainties about exchange rate that may cause capital loss.

The demerits of fixed exchange rate system are:

  1. It creates a barrier oh achieving the objective of free markets.
  2. Under this system, the countries with deficits in balance of payment uses their stock of gold and foreign currencies to solve the problem. This can further create problem as the country may be forced to devalue their currency. On the other hand, countries with surplus in balance of payments will face the problem of inflation.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 15.
“It is not in the nature of the good but in the economic nature of its use that a good becomes final good”. Elaborate. [4]
Answer:
Any item that is meant for final use and will not pass through any more stages of production or transformations is called final good. It is called a final good because once it has been sold it passes out of the active economic flow and it will not undergo any further transformations by the hands of any producer.

It may, however, undergo transformation by the action of the ultimate purchaser. For example, most of the items that enter our kitchen are transformed through the process of cooking. But cooking at home is not an economic activity, even though the product involved undergoes transformation.

Home cooked food is not sold to the market. However, if the same cooking was done in a restaurant where the cooked product would be sold to customers, then the same items would cease to be final goods and would be counted as inputs to which economic value addition can take place.

Thus, it is not in the nature of the good but in the economic nature of its use that a good becomes a final good.

Question 16.
Calculate National Income by (A) Income method and (B) Expenditure method: [6]

S.No. Particulars Amount (₹ in crores)
0) Rent 1,500
(ii) Net factor income from abroad 50
(iii) Wages and salaries 25,000
(iv) Indirect tax 1,000
(v) Government final consumption expenditure 11,200
(Vi) Subsidies 300
(vii) Royalty 200
(viii) Net exports 200
(ix) Interest 6,400
(x) Corporate tax 200
(xi) Profit after tax 4,000
(xii) Households final consumption expenditure 26,000
(xiii) Change in stock 100
(xiv) Net domestic fixed capital formation 600
(XV) Final consumption expenditure of private non-profit institutions serving households 300

Answer:
(A) National Income by Income Method:
NDPFC = Wages and salaries + Royalty
+ Interest + Corporate tax + Profit after tax + Rent ‘
= 25,000 + 200 + 6,400 + 200 + 4,000 + 1,500
= ₹ 37,300 crores
NNPFC = NDPFC + NFIA
= 37,300 + 50
= ₹ 37,350 crores

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

(B) National Income by Expenditure Method:
GDPMP = Final consumption expenditure of private non-profit institutions serving households + Households final consumption expenditure + Government final consumption expenditure + Net domestic fixed capital formation + Depredation + Change in stock + Net exports
= 300 + 26,000 + 11,200 + 600 + 0 + 100 + (-200)
= ₹ 38,000 crores
NNPFC = GDPMP – Depreciation + NFIA – NIT
= 38,000 – 0 + 50 – (1000 – 300)
= ₹ 37,350 crores

Question 17.
The consumption function in an economy is C = 80 + 0.6Y and investment level is ₹ 800 crores. State whether the following are true or false by giving reasons. [6]
(A) Equilibrium level of income is ₹ 2,100 crores.
(B) Is ₹ 275 crores the total change in income if investment rises by ? 150 crores?
(C) Value of investment multiplier is 2.5.
OR
Discuss the per capita income trend of Indian economy from 2015 to 2018.
Per capita national income across India from financial year 2015 to 2018. with estimates until 2022 (in 1.000 indian rupees)
CBSE Sample Papers for Class 12 Economics Set 4 with Solutions 3
Answer:
Given, Consumption function, C = 80 + 0.6Y
(A) False,
At equilibrium level, AD = AS
C + I = Y
Given, C = 80 + 0.6Y and I = ₹ 800 crores
Substituting the values in the equation,
We get
(80 + 0:6Y) + 800 = Y
80 + 0.6Y + 800 = Y
800 + 80 = Y – 0.6Y
880 = 0.4Y
Y = 880 / 0.4 = ₹ 2,200 crores
Therefore, equilibrium level of income would be ₹ 2,200 crores

(B) False
Given, Change in investment, ∆l = ₹ 150 crores
Investment multiplier, k = \(\frac{1}{1-\mathrm{MPC}}\)
MPC is given as 0.6
So, k = \(\frac{1}{1-0.6}=\frac{1}{0.4}\) = 2.5
Alternatively, k = ∆ Y / ∆ I
Substituting the values in the equation, we
get
2.5 = ∆ Y/150
∆ Y = 150 × 2.5 = 375
Therefore, if investment rises by ₹ 150 crores, the change in income would be ₹ 375 crores.

(C) True
Investment multiplier, k = \(\frac{1}{1-\mathrm{MPC}}\)
Given, MPC = 0.6
Substituting the values in equation, we get
k = \(\frac{1}{1-0.6}\)
= \(\frac{1}{0.4}\) = 2.5
Therefore, value of Investment multiplier is 2.5

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

OR

India’s per capita net national income or NNI was around 150 thousand rupees in financial year 2022. In contrast, the gross national income at constant prices stood at over 146 trillion rupees. The previous year, GNI growth rate at constant prices was around nine percent. While GNI and NNI are both indicators for a country’s economic performance and welfare, the GNI is related to the GDP plus the net receipts from abroad, including wages and salaries, property income, net taxes and subsidies receivable from abroad.

On the other hand, the NNI of a country is equal to its GNI net of depreciation. In 2017, India ranked third amongst the Asia Pacific countries in terms of its gross national income, with China leading the way at 12.206 trillion U.S. dollars. This has been possible due to a favorable GDP growth in India, standing at 2.72 trillion US dollars in 2018.

National income per person or per capita is often used as an indicator of people’s standard of living and welfare. However, critics object to this by citing that since it is a mean value, it does not reflect the real income distribution. In other words, a small wealthy class of people in the country can skew the per capita income substantially, even though the average population has no change in income. This is exemplified by the fact that in India, the top one percent of people control over 58 percent of the country’s wealth.

Section – B (40 Marks)
Indian Economic Development

Question 18.
………………. is not a policy initiated under the New Economic Policy. [1]
(Choose the correct alternative)
(a) Licensing
(b) Privatisation
(c) Globalisation
(d) Liberalisation
Answer:
(a) Licensing

Explanation:
New Economic Policy, 1991 stressed on abolishing the license raj.

Related Theory
The government through liberalisation, privatisation and globalisation initiated the New Economic Policy consisting of various economic reforms with an aim of creating a more competitive environment in the economy and removing the barriers to entry and growth of firms.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 19.
China achieved highest growth rate in ………………….. sector. [1]
(Choose the correct alternative)
(a) agriculture
(b) industrial
(c) service
(d) None of these
Answer:
(b) industrial

Explanation:
China focused mainly on industrialisation after becoming People’s republic.

Related Theory
To achieve rapid industrial growth, China initiated various programmes such as The Great Leap Forward, Great Proletarian Cultural Revolution, Rapid Industrialisation Programme etc.

Question 20.
Read the following Statement-Assertion (A) and Reason (R). Choose one of the correct alternatives given below: [1]

Assertion (A): Land ceiling is the policy of the government to promote equity in the agricultural sector.
Reason (R): Land reforms primarily refer to change in the ownership of landholdings.
(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 Statement-Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): In 1955, the Village and Small Scale Industries Committee, also called Karve committee, noted the possibility of using small scale industries for promoting rural development.
Reason (R): In 1956, Industrial Policy Resolution was adopted, which tried to build the basis for a socialist pattern of society.
(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:
Land reforms refer to change in the ownership by making tillers the owner of the land. Land ceiling means fixing the maximum size of land which could be owned by an individual The purpose of land ceiling is to reduce the concentration of land ownership in few hands.

OR

(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Explanation:
Karve Committee defined small scale industry with reference to maximum investment allowed on the assets of a unit. Industrial Policy Resolution, 1956 classified industries into three categories.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 21.
Read the following Statement-Assertion (A) and Reason (R). Choose one of the correct alternatives given below: [1]

Assertion (A): Over the past few decades, there has been a drastic rise in global warming.
Reason (R): The push of economic development has increased the emission of green house gases into the atmosphere.
(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:
Global warming is the longterm heating of Earth’s climate system due to human activities, primarily fossil fuel burning, which increases greenhouse gas levels in earth’s atmosphere.

Question 22.
Arrange the following events of China in chronological order and choose the correct alternative: [1]
(i) Rapid Industrialisation Programme
(ii) Great Leap Forward
(iii) Great Proletarian Cultural Revolution
(iv) Five Year Plan
(a) (i), (ii), (iii), (iv)
(b) (ii), (iii), (iv), (i)
(c) (iv), (ii), (iii), (i)
(d) (iv), (iii), (ii), (i)
Answer:
(c) (iv), (ii), (iii), (i)

Explanation:

  1. Rapid Industrialisation Programme – started in 1978
  2. The Great Leap Forward Campaign – started in 1958
  3. Great Proletarian Cultural Revolution took place from 1966-76
  4. Five year plan – started in 1953

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 23.
From the set in CoLumn I and II, choose the correct pair of statement:

Column I Column II
(A) Human development Index (i) Expected life of a person
(B) Childhood stunting (ii) Malnutrition
(C) Life expectancy (iii) Deaths in children
(D) Infant mortality rate (iv) Standard of living

(a) A – (i)
(b) B – (ii)
(c) C – (iii)
(d) D – (iv)
Answer:
(b) B – (ii)

Explanation:
Childhood stunting: Impaired growth and development in children due to poor nutrition.

Human development index: Composite index of life expectancy, education and per capita income reflecting standard of living.

Life expectancy rate: Average life expectancy at the time of birth.

Infant mortality rate: Number of deaths per 1,000 live births of children under one year of age.

Question 24.
Read the following statements and select the correct alternative from the following: [1]
Statement 1: Brain drain is a cause for poor human capital formation in India.
Statement 2: The quality of human capital also decreases due to high growth of population.
Alternatives:
(a) Both the statements are true.
(b) Both the statements are false.
(c) Statement 1 is true but Statement 2 is false.
(d) Statement 1 is false but Statement 2 is true.
Answer:
(a) Both the statements are true.

Explanation:
The problems faced by human capital formation are brain drain and high growth of population.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 25.
Physical capital helps in formation of human capital. Consider this statement and choose the correct option with reference to it. [1]
(a) The statement is true.
(b) The statement is false as Human capital helps in formation of physical capital as physical capital is passive in nature.
(c) The statement is false as Human capital helps in formation of physical capital as physical capital is active in nature.
(d) None of these
Answer:
(b) The statement is false as Human capital helps in formation of physical capital as physical capital is passive in nature.

Explanation:
Human capital does not help in formation of physical capital as physical capital is passive in nature. However, human capital increases productivity of physical capital as specialised and skilled workers can handle machines or techniques better than the unskilled workers. This increases productivity and hence production, thereby leading to economic growth.

Question 26.
Read the following statements carefully and choose the correct alternative from the following: [1]
Statement 1 : Poverty in an economy is the result of rapidly rising population.
Statement 2 : Creation of income generating assets does not address the problem of poverty.
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) Statement 1 is true and statement 2 is false

Explanation:
Poverty in an economy is a result of

  1. rapidly rising population:
  2. low productivity in agriculture
  3. under utilized resources;
  4. low rate of economic development;
  5. price rise Creation of income generating assets generate employment, which serve as a foundation for earning a livelihood, thereby addressing the problem of poverty.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 27.
…………………. type of unemployment mostly found in India: [1]
(a) Structural
(b) Frictional
(c) Cyclical
(d) Disguised
OR
Unemployment which occurs for the time period when workers move from one job to another job is known as ………………
(a) Cyclical unemployment
(b) Seasonal unemployment
(c) Technological unemployment
(d) Frictional unemployment
Answer:
(d) Disguised

Explanation:
Disguised unemployment is the unemployment that does not affect aggregate economic output. It occurs when productivity is low and too many workers are filling too few jobs. It can refer to any part of the population that is not employed at full capacity.

Related Theory
Structural unemployment refers to a mismatch between the jobs available and the skill levels of the unemployed. Frictional unemployment involves people transitioning between jobs; it has nothing to do with the economic cycle and is voluntary. Cyclical unemployment is a type of unemployment which is related to the cyclical trends in the industry or the business cycle.

OR

(d) Frictional unemployment

Question 28.
Interpret the given picture and discuss how we can achieve sustainable development?
CBSE Sample Papers for Class 12 Economics Set 4 with Solutions 3
CBSE Sample Papers for Class 12 Economics Set 4 with Solutions 4
Answer:
We can achieve the sustainable development by adopting these following points:
(1) Limiting the Human population: Lesser the population, less will be the burden on environment (Example less trees to be cut, less water is polluted, less garbage produced)

(2) Technological progress should be input efficient, not input consuming: We should develop new technologies which use those inputs which are environment friendly and available in large amount. Instead of generating electricity from coal, we can use solar power.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 29.
“The development of Railways is the most important contribution of Colonial rule to Indian economy.” Discuss. [3]
OR
“The purpose of government has been to promote regional equality”. In view of this, discuss the role of Industrial Policy Resolution, 1956.
Answer:
The British introduced railways in India in 1850 and it is considered as one of their most important contribution to Indian economy. The railways enabled the people to undertake long distance travel thereby breaking geographical and cultural barriers. Railways were developed to move finished goods imported from Britain to different interior parts of colonial India.

Britishers wanted to widen the size of the market for their own goods. It also led to commercialisation of agriculture, the profits from which never reached tf\e Indian people, and made the village economy self sufficient.

OR

Industrial Policy Resolution, 1956 was the basis of Second Five Year Plan and tried to develop socialist pattern of society. This resolution classified industries into three categories; first category was absolutely owned by the state comprising of 17 industries such as railways, air transport, arms and ammunition, iron and steel and atomic energy.

In the second category, private sector could supplement the efforts of state, with state taking the sole responsibility of starting new unTts and it comprised of 12 industries.

The third category consisted of remaining industries which were to be in the private sector. No new industry was allowed without obtaining license from the government.

This policy was used for promoting industry in backward regions and obtaining a license for establishing unit in economically backward area was very easy. These units were also given concessions such as tax benefits and electricity at low tariffs.. The government tried to promote regional equality through this policy.

Question 30.
Do you think that in the last 50-60 years, employment generated in the country is commensurate with the growth of GDP in India? How? [4]
Answer:
No, employment generated in the country does not commensurate with the growth of GDP in India because India has experienced jobless growth in the last 50-60 years. Jobless growth means that the GDP of the country is rising but without general employment. Causes of jobless growth are:

  1. Stagnancy of the industrial sector which did create the necessary prosperity, employment and socio-economico political growth.
  2. Majority of the population continues to be employed in the agricultural sector despite lower incomes earned from this sector. To compensate for lower incomes most population became engaged in tertiary sector.
  3. Lack of skills and education, gender discrimination, income disparities, lack of social security and lack of easy access to health and safety (especially for women) also discouraged relevant equal employment opportunities despite economic growth.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 31.
“India, Pakistan and China have many similarities in their developmental strategies”. Elaborate. [4]
Answer:
India, Pakistan and China started their developmental planning almost at the same time. India and Pakistan got independent in 1947 and People’s Republic of China was established in 1949. While India announced its First Five Year plan for 1951-56, Pakistan announced its First Five year plan in 1956 and China announced its first Five Year plan in 1953.

Since 2013, Pakistan is working on the basis of 11th Five year development plan (2013-18) whereas China is now working on 13th Five Year plan (2016-20). Until 2017, India has also been following Five Year plan based development model.

Question 32.
“The efficient working of modern economy depends on infrastructure”. Justify the statement. [4]
OR
State any four pressing environmental concerns of India. Correction for environmental damages involves opportunity costs. Explain.
Answer:
Infrastructure is the support system on which depends the efficient working of modern industrial economy. Modern agriculture also largely depends on it for speedy and large scale transport of seeds, pesticides, fertilisers and the produce using modern roadways, railways and shipping facilities. Infrastructure contributes to economic development of a country both by increasing the productivity of the factors of production and improving the quality of life of its people.

Inadequate infrastructure can have multiple adverse affects on health. Improvements in water supply and sanitation have a large impact by reducing morbidity from water borne diseases and reducing the severity of disease when it occurs. In addition to the obvious linkage between water and sanitation and health, the quality of transport and communication infrastructure can affect access to healthcare.

Hence, it is justified that efficient working of modern economy largely depends on infrastructure.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

OR

Four pressing environmental concerns of India are as follows:
(1) Land degradation and solid waste management
(2) Biodiversity loss

(3) Air pollution with special reference to vehicular pollution in urban cities Correction for environmental damages involves opportunity costs as it requires huge investments of money and resources to rectify these environmental issues. Opportunity costs are the costs of the opportunities foregone.

By choosing harmful environmental practices, the possible positive effect on environment that can be created by favourable environmental practices are forgone. The choice of harmful environmental practices has resulted in increasing opportunity costs.

Question 33.
“India’s economy is expected to grow 9.2% in the current financial year.” [6]
Does the given statement mean that weLfare of people of India increase at the same rate?
OR
Low employment among women is a reflection of economic backwardness of a country. Suggest some measures for increased employment opportunities for women.
Answer:
Generally it is considered that an increase in the Gross Domestic Product (GDP) of any economy (India in this case) ensures increase in welfare of the people of the country. However, this may not always be correct. Some of the prime reasons for the same are:

  1. unequal distribution and composition of GDP,
  2. non-monetary transactions in the economy which are not accounted for in GDP, and
  3. occurrence of externalities in the economy – (both positive and negative).

Nominal Gross Domestic Product (GDP) is measured as the product of current year output (Q1) of final goods and services and their current year price (P1). Real Gross Domestic Product (GDP), on the other hand, is measured as product of current year output (Q1) and their base year price (P0). Real GDP will increase if the output of goods and services produced in an economy is increasing.

Yes, the real GDP is a a better indicator of economic growth than Nominal GDP as the Real GDP is free from the influence of inflation or deflation in the economy during the time period.

OR

I shall suggest the following measures to increase the employment opportunities for women.

  1. Education and training opportunities for women should be further expanded, diversifies and made easily accessible.
  2. Residential accommodation for working mothers should be increased.
  3. There should be much more facilities of creches and child care during the working hours of mothers.
  4. There should be large scale publicity and ‘building of public opinion in favour of employment of women.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

Question 34.
“Agricultural marketing has come a long way with the intervention of the government”. Discuss. [6]
OR
Study the following chart showing the growth of agricultural credit and analyse the trend from 1990-2010.
CBSE Sample Papers for Class 12 Economics Set 4 with Solutions 5
Answer:
Agricultural marketing is a process that involves the assembling, storage, processing, transportation, packaging, grading and distribution of different agricultural commodities across the country.

Prior to independence, farmers while selling their produce to traders suffered from faulty weighing, low prices and manipulation of accounts. They also did not have proper storage facilities to keep back their produce for selling later at a better price. Therefore, state intervention became necessary to regulate the activities of the private traders.

The first step was regulation of markets to create orderly and transparent marketing conditions. Second is provision of physical infrastructure facilities like roads, railways, warehouses, godowns, cold storages, and processing units. Cooperative marketing, in realising fair prices for farmers’ products, is the third aspect of government initiative.

The success of milk cooperatives in transforming the social and economic conditions of Gujarat and some other parts of country is testimony to the role of cooperatives. The fourth element is the policy instruments like

  1. assurance of minimum support prices (MSP) for agricultural products,
  2. maintenance of buffer stocks,
  3. distribution of food grains through PDS.

OR

Growth of rural economy depends primarily on infusion of capital, from time to time, to realise higher productivity in agriculture and non-agriculture sectors. A major change occurred after 1969 when India adopted social banking and multi agency approach to adequately meet the needs of rural credit. Later, the National Bank for Agriculture and Rural Development (NABARD) was setup in 1982 as an apex body to coordinate the activities of all institutions involved in rural financing system. The institutional structure of rural banking today consists of a set of multi agency institutions, namely, commercial banks, regional rural banks and cooperatives.

CBSE Sample Papers for Class 12 Economics Set 4 with Solutions

The chart shows the growth of agricultural credit since the New Economic Policy, 1991. The share of cooperatives in agricultural credit showed a steep rise in 1991 and its share in total credit went up to 35% and continued till 1995 before falling down to below 10% in 1998. In 1998, the cooperatives got a boost and became the major agricultural credit agency with its share going upto as high as 60% in 2001.

Since then it seems the people has lost trust in finance from cooperatives and the share went down to almost nil in 2009. Commercial banks and regional rural banks (RRBs) has shown a consistent growth since 1990 and almost share the credit market equally. This may be because of control of Reserve Bank of India on both these institutions.