CBSE Sample Papers for Class 12 Economics Set 8 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Economics with Solutions Set 8 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Economics Set 8 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.
“CRR cut will improve bottom line, says Karnataka Bank CEO” Private lender Karnataka Bank MD and CEO Mahabaleshwara MS on Friday said the Reserve Bank of India (RBI) slashing the Cash Reserve Ratio (CRR) by 100 basis points (BPS) from 4% to 3% will improve the bottom line of banks.
Identify the quantitative function of Central bank among the given options.
(a) Repo rate
(b) Margin requirement
(c) Cash reserve ratio
(d) Option (a) and (c) [1]
Answer:
(d) option (a) and (c)
Explanation: A Repo rate is a rate at which commercial banks borrow money by selling their securities to the RBI to maintain liquidity. CRR refers to a certain percentage of commercial bank’s net demand and time liability that commercial banks have to maintain with the RBI at all times.

Related Theory
Also, there are some qualitative functions of central bank that includes, margin requirement rationing of credit moral suasion.

Question 2.
If the value of Average Propensity to Save (APS) is 0.2 and National Income is ₹4,000 crore, then consumption will be………..
(a) 4,000 crores
(b) ₹ 3,200 crores
(c) 3,800 crores
(d) ₹ 2,600 crores [1]
Answer:
(b) ₹ 3200 Crores
Explanation: APS = Saving/Income
0.2 = Saving/4000,
Saving = 0.2 × 4,000 = ₹ 800
Consumption = Income – Saving
C = Y – S
= 4,000- 800
C = ₹3,2000

Question 3.
According to adjustable peg system (or Bretton woods System) of exchange rate:
(a) US dollar was assigned gold value at fixed price
(b) Different currencies were pegged to one currency
(c) Parity between two currencies was determined by the quantity of gold contained in them
(d) All of the above
OR
In case of an underemployment equilibrium, which of the following alternative is not true?
(a) Aggregate demand is equal to Aggregate supply.
(b) There exist excess production capacity in the economy.
(c) Resources are not fully and efficiently utilised.
(d) Resources are fully and efficiently utilised. [1]
Answer:
(d) All of the above

Explanation: Bretton woods system, even when it was a fixed system of exchange rate. allowed some adjustments. So it was called ‘adjustable peg system of exchange rate. According to this system, Different currencies were pegged to one currency, US dollar was assigned gold value at a fixed price, gold continues to be the ultimate unit of parity between any two currencies.

Related Theory
Exchange systems are a way for people to trade goods and services without using money. In an exchange system, each participant lists the goods or services they can provide, and then everyone tries to find someone who will trade them something they need in return

OR

(d) Resources are fully and efficiently utilise.
Explanation: Underemployment equilibrium occurs when aggregate demand equals aggregate supply at a rote less than full employment.

Related Theory
An MPC equal to one means that a change in income (ΔY) led to the same proportionate change in consumption (ΔC). That is, a person spent 100% of the additional income an goods and services and saved none of it An MPC less than one means that a change in income produced a proportionally smaller change in consumption.

Question 4.
On the basis of following schedule, what is the value of MPS?

Income (in ₹ crores)	0	50	100	150	200
Saving (in ₹ crores)	-2	-10	0	30	60

From the following given sets of statements in column I and II, choose the correct pair of statements.

	Column I		Column II
A	Exports of goods and services	(I)	Excess of Exports of goods over the imports of goods
B	Trade surplus	(II)	An element of invisible items
C	Current Transfers to rest of the world	(III)	Recorded as a positive item in the BOP account
D	Portfolio investments	(IV)	Foreign institutional investors

Alternatives:
(a) A -(I)
(b) B – (II)
(c) C – (III)
(d) D – (IV)
Answer:
(b) 0.2
Explanation: MPS at 150 crores level, of income.

OR

(d) D-(IV)
Explanation: Foreign Portfolio Investments refers to the purchase of securities and other financial assets by investors from other country.

Question 5.
Read the following statement -Assertion
(A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Demand Deposits are considered as a convenient mode of payment for execution of even the high value transactions.
Reason (R): Demand Deposits are non withdrawable in nature and cannot be withdrawn against issue of cheques and other similar instruments of payment. [1]
(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: Demand deposits are payable by the bank on demand from the account holder. Term deposits, also known as time deposits, are investment deposits.

Related Theory
Term deposits, also known as time deposits, are investment deposits made for a predetermined period, ranging from a few months to several years.

Question 6.
Read the following statement -Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Trade of invisible items between two nations is a part of capital account of Balance of Payment.
Reason (R): Transactions that affect the asset liability status of a country in relation to the rest of the world are known as capital account transaction.
(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:
Assertion (A) is false but Reason (R) is true.
Explanation: Trade of invisible items between two nations is a part of Current Account of Balance of Payment.

Related Theory
There is huge difference between visible and invisible items of BOP’s. Trade of visible items between the countries is known as Balance of Trade

Question 7.
Read the following statements carefully and choose the correct alternatives given below:
Statement 1: Subsidies do not add any burden on the financial health of a nation.
Statement 2: Complete removal of subsidies may violate the aim of equitable distribution of income.
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 [1]
Answer:
(d) Statement 2 is true and Statement 1 is false

Explanation: Subsidies add additional burden on the financial health of the nation by-charging the cost of things to the nation’s cash reserves instead of promoting the circulation of money within the economy through trade and commerce. When people use subsidies to pay for goods and services, their own money doesn’t get circulated back into the economy, thus putting additional strain on the nation’s already limited budget

Question 8.
Goods sold to a business organisation for further production is:
(a) Intermediate goods
(b) Final goods
(c) Both (a) and (b)
(d) None of the above [1]
Answer:
(a) Intermediate goods
Explanation: These goods are used for further processing or resale in the same year.

Question 9.
Read the following statements carefully and choose the correct alternative from the following:
Statement 1: Demonetization was the step taken by the Government of India in order to tackle the problems of corruption, black money, terrorism and circulation of fake currency in the Indian Economy.
Statement 2: Demonetization has ensured improved tax compliance in India over the period of time.
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 [1]
Answer:
(a) Both the statements are true
Explanation: Demonetization refers to the act of stripping a currency as legal tender. De-monetization significantly reduces corruption from taking place. The advantages of Demonetization are:

1. To control black money and corruption by stopping hoarding of money;
2. To prevent from duplication of currency notes;
3. To fight against terrorism by ripping off money funding or money laundering to the terrorist associations operating in India,
4. reduced tax avoidance.

Question 10.
Read the following statements carefully and choose the correct alternative from the following:
Statement 1: Public goods are those goods and services that are collectively consumed by the public.
Statement 2: Public goods are excludable and rivalries in nature.
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.

OR

Read the above figure carefully and identify the concept given in the figure.
(a) Public goods
(b) Income expenditure
(c) Two-sector dosed economy
(d) None of the above. [1]
Answer:
(c) Statement 1 is true and Statement 2 is false
Explanation: Public goods are commodities or services that benefit all members of society. Typically, these services are administered by the government. Public goods are non excludable, it means that they are either costly or impossible to exclude someone from using these goods. It means that it is available to all the citizens. Public goods are non rivalrous, it means that as one person uses the good and another can also use it.

OR

(c) Two sector closed economy
Explanation: The above model is an example of two-sector closed economic model as it only involves household and firms. Exclusion of tertiary sector makes it a closed economic model.

Question 11.
“Circular flow principle is based on the assumption that one’s expenditure will become other’s income.” Explain the given statement.
OR
Which among the following are final goods and which are Intermediate goods? Given reašons.
(A) Milk purchased by a tea stall
(B) Bus purchased by a school
(C) Juice purchased by a student from the school canteen [3]
Answer:
In a two-sector economy, households and firms exist to run the economy. Households render factor services to the firms and earn factor incomes from them. Whereas; firms produce and sell goods and services to households and earn their income by an equal magnitude. Thus, in a circular income mode, the axiom that one’s expenditure is other’s income holds true.

OR

(A) It is an intermediate good because it is used by producer during production process that is making tea and not for final consumption
(B) It is a final good as, it is purchased by school for final consumption.
(C) It is a final good as, it is purchased by a student for final consumption

Question 12.
‘All producer goods are not capital goods’. Do you agree? [3]
Answer:
Yes, I agree that all producer goods are not capital goods because producer goods include:)

1. Goods which are used as raw materials like wood that is used to make furniture.
2. Goods which are used as fixed assets such as plant and machinery. Capital goods include only,fixed assets of the producers which are durable goods while goods used as raw materials are not repeatedly used in the process of production and used on onetime basis unlike durable goods. Thus, all producer goods are not capital goods.

Question 13.
Explain any one type of unemployment, which exists during full employment.
OR
Is fiscal deficit necessarily inflationary? Explain. [4]
Answer:
Full employment refers to a situation in which everyone is willing to work, at the existing wage rate gets work. However, structural unemployment may exist even during full employment. It is the position of unemployment, which originates for some time because of the change in the structural system of an economy. Structural unemployment occurs when there is a lack of other production factors, change in production technique or lack of training of labourers.

OR

Fiscal deficit may or may not be inflationary depending on the possibility of the adjustment of output by the firms. If the firms are able to produce more output against the rise in AD (caused by fiscal deficit), then it need not to be inflationary. But, if the firms are not able to increase the output, it will lead to inflation.

Question 14.
Using a hypothetical numerical example, explain the process of credit creation by a commercial bank. [4]
Answer:
Credit multiplier measures the amount of money that the banks are able to create in the form of deposits with every initial deposit. The credit creation is inversely related to LRR. Higher the credit multiplier, higher will be the total credit created and vice – versa. The credit creation by commercial banks is determined by:

1. The amount of the initial deposit.
2. The Legal Reserve Ratio (LRR).

Suppose the initial deposits are ₹ 1000 and LRR is 10%, the banks will keep 10% of the deposits i. e. ₹ 100 as reserves and will lend the remaining amount of ₹ 900. Those who borrow will spend the money for making payments.

It is assumed that the entire ₹ 900 comes back as secondary deposits to the banking system. Now the banks will again keep 10% of ₹ 900 i. e. ₹ 90 as reserve and lend out ₹ 810. This process continues till total reserves become equal to initial reserves. Total money creation

Initial Deposit = \(\frac{1}{10 \%}\) = 1000\(\left(\frac{1}{10 \%}\right)\)
= ₹ 10,000
Hence, the initial deposit of ₹ 1000 has led to the total money supply of ₹ 10,000.

Question 15.
In the context of balance of payments account, state whether the following statements are true or false. Give reasons for your answer.
(A) Profits received from investments abroad is recorded in capital account.
Answer:
False, profit received from investments abroad affect neither the assets not the liabilities of a country or its residents. Therefore, it is recorded in current account.

(B) Import of machines is recorded in current account. [4]
Answer:
True, machines is a visible item. Therefore, it’s import is recorded in the current account.

Question 16.
“Tax rates on higher income group have been increased.” Identify and explain the objective of budget stated in the above line. [6]
Answer:
Reduction in inequalities : Even distribution of wealth and social welfare remains the main objective of budgetary policy. The government uses progressive taxation policy to reduce the inequalities of income and wealth in the country. Government imposed high tax rates on higher income group and low tax rate on lower income group. People with income below a certain level are not levied any direct tax altogether.

On the other hand, the government spent these tax receipts on granting subsidies and providing other public services such as health and education, to people with lower income groups, the wealth gets redistributed and reduction in inequalities is achieved.

Question 17.
(A) Answer the following questions on the basis of given figure:

(i) What does the shaded area AOB indicated?
Answer:
The shaded area AOB indicates negative savings or dissavings. Dis-savings is the other name of negative savings i.e. using the past savings or expenses met by borrowing. Dis-savings are done when the consumption expenditure is greater than the income (C > Y). This consumption is called autonomous consumption which is income inelastic

(ii) What is the significance of point B?
Answer:
Point B is the point of equilibrium. At point B, savings are zero and level of aggregate demand is equal to the level of aggregate supply in the economy. At this point the value of APS = Zero
(APS = S/Y)

(B) Justify the statement

1. MPC and MPS are related to multiplier.
2. Economy cannot be at equilibrium, when ex-ante savings are greater than ex-ante investments
3. Investment increases with the increase in income [6]

Answer:
Justify the statement

1. MPC is directly related to the multiplier and MPS is inversely related to the multiplier.
2. Economy cannot be at equilibrium, when ex-ante savings are greater than ex-ante investments implies that the fall in aggregate demand and increase in stock will induce the producer to stop the production and hence, income levels will reduce. It will continue till ex-ante savings are equal to ex-ante investment
3. There is a positive relationship between income and induced investment which is done for profit motive. But, autonomous investment does not change with the change in income.

SECTION – B
(Indian Economic Development)

Question 18.
You are a factory owner and have given employment to 400 workers. If 10 workers are dismissed by you without loss of production then this situation will be described as:
(a) Casual unemployment
(b) Disguised unemployment
(c) Structural unemployment
(d) Seasonal unemployment
OR
The Government can achieve its budget objective of ‘Redistribution of Income’ by _____
(Fill up the blank with correct alternative)
(a) managing the General Price Level in the economy to the desired level
(b) increasing the Gross Domestic Product (GDP) of the economy.
(c) bringing the production of goods and services under its direct and absolute control.
(d) rationalisation of taxes in pro-poor direction. [1]
Answer:
(c) Structural unemployment
Explanation: Structural unemployment is a category of unemployment caused by differences between the skills possessed by the unemployed population and the jobs available in the market Structural unemployment is a long-lasting condition that is caused by fundamental changes in the economy. Thus dismissal of workers doesn’t cause loss of production.

Related Theory
Disguised employment is such an employment that does not contribute to the output of an economy and is thus akin to a form of unemployment

Caution
There is a difference between frictional unemployment and structural unemployment do not confuse between these two terms.

OR

(d) rationalisation of taxes in pro-poor direction
Explanation: The total national income of the country goes either to the private sector, or the Government in form of taxes. The government affects the personal disposable income of households by making transfers and collecting taxes. It is redistribution function, which is one of the objective of government budget Through this, that the government can change distribution by rationalising the taxes in pro poor direction.

Question 19.
Arrange the following government policy in chronological order and choose the correct alternatives.
(I) Study group formed by planning commission for poverty
(II) Task force on projections of the Minimum Needs and Effective Consumption Demand
(III) Mahatma Gandhi National Rural Employment Guarantee Act
(IV) Jan Dhan Yojana
Choose the correct alternative:
(a) (II), (III), (IV), (I)
(b) (III), (II), (I), (IV)
(c) (I), (II), (III), (IV)
(d) (II), (IV), (I), (III)
Answer:
(d) (II), (IV), (I), (III)

Question 20.
State any one area in which Pakistan has an edge over India.
(a) Pakistan has achieved better results with regard to migration of work force from agriculture to industry
(b) Pakistan ranks high in human development index
(c) Pakistan has low death rate
(d) None of the above
OR
Identify the incorrect statement from the following: (Choose the correct alternative)
(a) Diversification in agriculture sector provides sustainable livelihood rural population.
(b) Diversification includes – change in cropping pattern, shift of workforce from agriculture to other allied activities and non-agriculture sector.
(c) Objective of investment in new agricultural avenues (non-farm activities) increases financial risks for the rural population.
(d) Diversification reduces the proportion of unemployed population in the rural areas to considerable limits. [1]
Answer:
(a) Pakistan has achieved better results with regard to migration of work force from agriculture to industry.
Explanation: Pakistan has a part over India due to success in few areas which include reducing population residing underneath the poverty line and migration of the staff from
the agricultural zone to the commercial area.

OR

(c) Objective of investment in new agricultural avenues (non-farm activities) increases financial risks for the rural population. . Explanation: The need for diversification arises from the fact that there is greater risk in depending exclusively on farming for livelihood. Diversification towards new areas is necessary not only to reduce the risk from agriculture sector but also to provide productive sustainable livelihood options to rural people. Thus, objective of investment in new agricultural avenues (non-farm activities) increases financial risks for the rural population.

Related Theory
Diversification is essential to provide supplementary gainful employment and in releasing higher level of income far rural people to overcome poverty.

Question 21.
From the set of events/systems given in column I and corresponding relevant fact given in column II, about China, choose the correct pair of statement:
(a) (II), (III), (IV), (I)
(b) (III), (II), (I), (IV)
(c) (I), (II), (III), (IV)
(d) (II), (IV), (I), (III)
Answer:
(c) (C) – (iii)

Question 22.
Read the following statement -Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Frictional unemployment is considered as voluntary unemployment.
Reason (R): Frictional unemployment does not occur due to a shortage of jobs.
(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): Green revolution led to changes in rural credit system.
Reason (R): Green revolution led to diversification of the portfolio of rural credit towards production oriented lending. [1]
Answer:
(a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of the Assertion (A).

Explanation: Frictional unemployment is considered as voluntary unemployment because the reason for unemployment is not a shortage of jobs, but in fact, the workers themselves quit their jobs in search of better opportunities.

Caution
Structural unemployment is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market Hence, both are different terms.

OR

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). ‘
Explanation: The Green Revolution was a harbinger of major changes in the credit system as it led to the diversification of the portfolio of rural credit towards production oriented lending. ’Kudumbashree’ is a women-oriented community-based poverty reduction programme being implemented in Kerala.

Related Theory
Rapid expansion of the banking system had a. positive effect on rural farm and non-farm output, income and employment, especially after the Green revolution it helped farmers to avail services and credit facilities and a variety of loans for meeting their production needs.

Question 23.
Read the following statement -Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): There is no evidence to prove that increase in human capital causes economic growth.
Reason (R): Quality of health and educational services is difficult to measure.
(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. [1]
Answer:
(d) Assertion is false but Reason is true

Explanation: Quality of health and educational” services is a difficult thing to measure in terms of quantity. Hence Reason is true.

India’s Micro, Small and Medium Enterprises (MSME) sector is poised for a mega transformation in 2020, with the launch of an Alibaba-like e- marketplace, trendy yet affordable khadi products to appeal to the masses and digital data-based credit ratings to help entrepreneurs avail loans. However, the MSME sector, often considered the bulwark of the economy as it contributes around 29% to the GDP and 48% to the Indian exports.

There is an urgent need of major reforms and policy interventions towards ensuring timely availability of low cost credit, improving ease of doing business and technological up gradation, to take on the formidable challenge of creating millions of jobs, ensure equitable distribution of national income and achieving largescale import substitution. The World Bank has recently approved loan worth $750 million to address the immediate liquidity and credit needs of India’s MSME sector that has been severely impacted by the Covid-19 crisis. This will give a push to the Atmanirbhar Bharat vision of the government

Question 24.
Identify which of the following is not an advantage of the MSME sector? (Choose the correct alternative)
(a) It is suited for the utilisation of local resources.
(b) It is helpful in creation of employment opportunities.
(c) It requires more capital than labour.
(d) It ensures equitable distribution of income in the country. [1]
Answer:
(c) It requires more capital than labour.
Explanation: Advantages of MSME sector includes – It utlised the local resources fully, creates employment opportunities and ensure equal distribution of income in the country.

Question 25.
MSME sector suffered to a large extent in COVID-19 pandemic situation due to ______
(fill up the blank with correct answer) [1]
Answer:
liquidity crunch

Explanation: Survey reports of various newspapers have shown that disruptions caused by the Covid-19 pandemic have impacted MSMEs earnings by 20-50%, micro and small enterprises faced the maximum heat, mainly due to liquidity crunch.

Question 26.
Read the following statements carefully and choose the correct alternatives given below:
Statement 1: The emergence of Self-Help- Groups (SHG’s) ensured the reduction in the fissures of the formal credit system.
Statement 2: The borrowings from SHGs mainly confined to consumption purposes by its members.
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. [1]
Answer:
(a) Both the statements are true.
Explanation: The emergence of Self-Help Groups ensured the reduction in the fissures of the formal credit system because the formal credit system has not been able to dispense adequate credit at cheaper rates to the rural poor. Thus, the micro-credit offered by the Self-Help Groups fills gap in the formal credit system. The borrowings from SHGs mainly confined to consumption purposes by its members and a very small proportion of the borrowings ever goes into productive purposes.

Question 27.
Read the following statements carefully and choose the correct alternatives given below:
Statement 1: Government of India adopted’ Trickle Down Approach’ to alleviate poverty to benefit the last man at the bottom of the pyramid.
Statement 2: Empirical data over the years have shown that trickle-down theory did not yield desired results in India.
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 [1]
Answer:
(a) Both the statements are true.

Explanation: The trickle-down theory states that tax breaks and benefits for corporations and the wealthy will trickle down to everyone else. Trickle-down economics involves less regulation and tax cuts for those in high-incometax brackets as well as corporations. However, critics argue that the theory has not yielded the desired results in India because the added benefits the wealthy receive adds to the growing income inequality in the country because.the benefits given to the rich are not transferred down to the middle and lower- classes of the society.

Question 28.
“India has failed to implement the recommendations of Education Commission of 1964 -66.” Give valid arguments in support of the given statement.
OR
Explain the meaning of human capital formation with the help of an example. [3]
Answer:
The given statement is appropriate. Over the years India has not been able to raise the educational standards to the desired level. Education Commission of 1964-66 had recommended that at least 6 % of GDP should be spent on education so as to make a noticeable rate of growth in educational achievements. However, the current expenditure level has been quite inadequate. Thus, necessary steps must be taken by the government in this direction.

OR

Human capital formation is a process which converts human resources into human capital. It is the process of acquiring and increasing the number of people with skills, education and experience which is necessary for economic development of the country. For example, if in the year 2014, the number of doctors and engineers in our country were 4,50,000 and in the year 2015 their number grew to 5,00,000 then it can be said that there is human capital formation to the extent of 50000 doctors and engineers.

Question 29.
‘The objectives of Jan Dhan Yojana is two fold, one is to raise the saving habit of the economy and second is to remove corruption’. Do you agree with the given statement. Support your answer with the valid reason. [3]
Answer:
Yes, I agree with the statement that the objectives of Jan Dhan Yojana is two fold, one is to raise the saving habit of the economy and second is to remove corruption. Jan Dhan Yojana was launched on 15 August, 2014. The aim of this program is to connect the population with the banking system. Under this program, most the rural population and population working in an unorganised sector had opened their accounts in the banks and therefore, with the access to the banking service they all started doing saving in their bank accounts and this is how the saving habits of the nation increases. Also, all the aids and subsidies of the various government programs are now directly being transferred into the accounts to the people and therefore the corruption caused by the intermediaries is now abolished.

Therefore, this program benefited the economy in two ways, with the rise in savings, financial sector of the economy get a boost and with no corruption people have more money to spend and the government is also able to achieve its objective of social welfare.

Question 30.

Interpret the given picture and explain the process involved in this. [3]
Answer:
The given picture shows the process of “Outsourcing”. In outsourcing, a company hires regular service from external sources, mostly from other countries, which was previously provided internally or from within the country (like legal advice, computer service, advertisement, security—each provided by respective departments of the company). As a form of economic activity, outsourcing has intensified, in recent times, because of the growth of fast modes of communication, particularly the growth of Information Technology (IT).

Question 31.
What do you mean by rural development? Bring out the key issues in rural development.
OR
There are various schemes launched by the Indian Government to eradicate poverty directly or indirectly. Mention any four anti-poverty programmes launched by the government to eradicate poverty. How can the effectiveness of these schemes can be improved? [4]
Answer:
Rural development is a comprehensive term which focuses on action for the development of areas which are lagging behind in overall development of village economy. It can be defined as a process leading to sustainable improvement in the quality of life of rural people. Key issues in rural development are as follows (any four):

1. Development of Infrastructure like electricity, irrigation, transport facility, etc. for agricultural research and information expansions.
2. Development of a robust system of rural credit.
3. Development of human resources like health, addressing both sanitation and public health.
4. Development of human resources including literacy, education and skill development.
5. Honest implementation of land reforms.

OR

(1) Various schemes run by the Indian government to eradicate poverty directly or indirectly are:

(a) Prime Minister Rozgar Yojana
(b) Rural Employment Generation Programme
(c) Swarna Jayanti Gram Swarojgar Yojana
(d) National Rural Employment Guarantee Act

The effectiveness of these schemes can be improved with the help of following measures

(a) Population control
(b) Create new employment opportunities
(c) Education
(d) Proper implementation and right targeting

Question 32.
Critically appraise the New Economic Policy of 1991. [4]
Answer:
The economic reforms initiated through NEP had benefitted the country in many ways. They helped the country to become a vibrant economy, have stimulated industrial production, helped to check fiscal deficit and inflation.

They also led to a substantial increase of foreign exchange reserves and foreign investment.

However, these reforms have led to an increase in the income of those who were already rich. Quality of consumption of only high-income groups has increased and economic growth has not trickled down to the poorer sections of the society.

Growth has been concentrated only in some selected area in the service sector such as telecommunication, IT, finance, entertainment, travel, hospitality services, real estate and trade. Vital sectors, such as agriculture and industry, which provide livelihood to millions of people in the country have not benefitted much from reforms thereby increasing income disparities. So we can conclude that economic reforms in India have not promoted social justice and welfare.

Question 33.
Write short-notes on:
(A) Global Warming
Answer:
Global Warming: Global warming is a gradual increase in the average temperature of the earth’s lower atmosphere as a result of the increase in greenhouse gases since the Industrial Revolution. Factors that contribute to global warming are the burning of coal and petroleum products; deforestation, which increases the amount of carbon dioxide in the atmosphere; methane gas released in animal waste; use of fossil fuels etc.

It has resulted in melting of polar ice with a resulting rise in sea level and coastal flooding; disruption of drinking water supplies dependent on snow melts; extinction of species as ecological niches disappear; more frequent tropical storms; and an increased incidence of tropical diseases.

(B) Opportunity Cost of Negative environmental impact
OR
Write a short note on Human Development Index (HDI). [6]
Answer:
Opportunity Cost of Negative environmental impact: The past development has polluted and dried up rivers and other aquifers making water an economic good. Besides, the intensive and extensive extraction of both renewable and non- renewable resources we exhausted some of these vital resources and are compelled to spend huge amounts on technology and research to explore new resources.

Added to these are the health costs of degraded environmental quality, decline in air and water quality (seventy percent of water in India is polluted) have resulted in increased incidence of respiratory and water-borne diseases. Hence the expenditure on health is also rising. To make matters worse, global environmental issues such as global warming and ozone depletion also contribute to increased financial commitments for the government. Thus, it is clear that the opportunity costs of negative environmental impacts are high.

OR

The Human Development Index (HDI) is a statistical tool used to measure a country’s overall achievement in its social and economic dimensions. The social and economic dimensions of a country are based on the health of people, their level of education attainment and their standard of living. Pakistani economist, Mahbub ul Haq created HDI in 1990 which was further used to measure the country’s development by the United Nations Development Program (UNDP).

Calculation of the index combines four major indicators: Life expectancy for health, expected years of schooling, mean of years of schooling for education and Gross National Income per capita for standard of living. HDI uses this to create an overall score between 0 and 1, wherein 1 indicates a high level of economic development and 0 a very low level. India ranks 3.30 on 2018 Human Development Index with HDI value for 2017 is 0.640 placing the country in the medium human development category. Between 1990 and 2017, India’s HDI value increased from 0.427 to 0.640, an increase of nearly 50 percent – and an indicator of . the country’s remarkable achievement in lifting millions of people out of poverty.

Read the following text carefully and answer question number given below:

India vs Pakistan: A tale of two economies NEW DELHI: India and Pakistan — two of the biggest South Asian nations — started their economic journey around the same time after gaining Independence. Not many know that there was a point in the 1960s when Pakistan’s per capita GDP used to be higher than that of India’s. However, over the years, India has not only surpassed Pakistan’s per capita GDP but taken a commanding lead on almost every economic front.

Pakistan today is facing global criticism for failing to rein in homegrown terror groups even as it grapples with an ailing economy and mounting global debt. India, on the other hand, has become a global frontrunner which recently surpassed the UK to become the fifth largest economy in the world. The stark economic contrast between the two neighbours shows that Pakistan’s unstable government, conflicting power centres, covert support to terror groups, and involvement in global terror strikes such as the 26/11 Mumbai attacks, have bled its economy.

From a higher per capita GDP of $83.33 in 1960, Pakistan’s today lags much behind India which witnessed multi-fold rise its per capita GDP over the years. From 2007, India’s per capita GDP has consistently stayed higher than that of Pakistan’s. India is today the fastest growing trillion-dollar economy in the world and the fifth largest overall, according to data compiled by IMF’s World Economic Outlook. It jumped from the 9th spot in 2010 to the 5th spot in a span of just 9 years. The GDP of India is almost 10 times that of Pakistan, which is placed at the 45th position.

India’s rise has been even more dramatic across the past couple of years. Since 2008, India’s GDP has risen almost 140 per cent as against an increase of about 63 per cent for Pakistan.
https://timesofindia.indiatimes.com/business/india-business/india-vs-pakistan-a-tale-of-two-economies/articleshow/79450051.cms

Question 34.
(A) “India and Pakistan started their economic journey at the same time but now India is far ahead of Pakistan.” In the light of above statement, give any two reasons.
Answer:
India is ahead of Pakistan as following have affected Pakistan’s economy:

(1) Unstable Government: In 1950, Pakistan’s per person GDP was US$1268, which was almost 50 percent greater than India that year. However, in the backdrop of sustained political uncertainty and upheaval, Pakistan stagnated throughout the 1950s while a politically stable India grew. As a result, by 1960, India had almost caught up with Pakistan in per capita GDP terms with the per capita income gap having shrunk to 15 percent.

(2) Homegrown Terror Groups or Ailing Economy: Pakistan’s economy has suffered a direct and indirect cost linked to terrorist activities of almost $126.79 billion, which is equal to $10762.14 billion. Pakistan today is facing global criticism for failing to rein in homegrown terror groups even as it grapples with an ailing economy and mounting global debt.

(B) Compare and analyze India and Pakistan economy in the terms of GDP growth. [6]
Answer:
India has surpassed Pakistan’s per capita GDP over the years. From 2007, India’s per capita GDP has consistently stayed higher than that of Pakistan’s. India is today the fastest growing trillion-dollar economy in the world and the fifth largest overall, according to data compiled by IMF’s World Economic Outlook. It jumped from the 9th spot in 2010 to the 5th spot in a span of just 9 years. The GDP of India is almost 10 times that of Pakistan, which is placed at the 45th position. Since 2008, India’s GDP has risen almost 140 percent as against an increase of about 63 percent for Pakistan.