Students can access the CBSE Sample Papers for Class 12 Economics with Solutions and marking scheme Term 2 Set 1 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 12 Economics Standard Term 2 Set 1 with Solutions
Max. Marks: 40
Time: 2 Hours
General Instructions:
- This is a Subjective Question Paper containing 13 questions.
- This paper contains 5 questions of 2 marks each, 5 questions of 3 marks each, and 3 questions of 5 marks each.
- 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
- 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
- 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
- This question paper contains Case/Source Based Questions.
Question 1.
Distinguish between final goods and intermediate goods. Give an example of each.
OR
Distinguish between Microeconomics and Macroeconomics. Give an example of each.
Answer:
| Final Goods | Intermediate Goods |
| (a) These are those goods which are either used for consumption or for investment purposes. | These goods are those goods which are used either for resale or for further production in the same year. |
| (b) They are included in both national and domestic income. | They are neither included in national income nor in domestic income. |
| (c) For e.g., milk purchased by households. | For e.g., milk used in dairy for resale. |
OR
| Micro-economics | Macro-economics |
| 1. It is the study of individual economic units of an economy. | It is the study of the economy as a whole and its aggregates. |
| 2. It deals with individual income, individual prices, and individual outputs, etc. | It deals with aggregates like National Income, general price level, and national output, etc. |
| 3. Its central problem is price determination and allocation of resources. | Its central problem is determination of level of income and employment. |
| 4. Its main tools are demand and supply of particular commodity/factor. | Its main tools are aggregate demand and aggregate supply of the economy as a whole. |
| 5. It helps to solve the central problem of ‘what, how, and for whom to produce’ in the economy, | It helps to solve the central problem of ‘full’ employment of resources in the economy. |
Question 2.
As a result of increase in investment, National Income rises by ₹600 crores. If the Marginal Propensity to Consume is 0.75, Calculate the increase in investment.
OR
If Personal Disposable Income is ₹1,000 crores and consumption expenditure is ₹750 crores, find out Average Propensity to Save.
Answer:
Here, ΔY = ₹ 600 crores, MPC = 0.75
Now, K = \(\frac{1}{1-\mathrm{MPC}}\)
⇒ K = \(\frac{1}{1-0.75}\)
or K = \(\frac{1}{0.25}\) = 4
Again, we know that K = \(\frac{\Delta \mathrm{Y}}{\Delta \mathrm{I}}\)
⇒ K = \(\frac{600}{\Delta \mathrm{I}}\)
∴ ΔI = \(\frac{600}{4}\) = ₹ 150 crores
OR
Y = ₹ 1,000 , C = ₹ 75O
S = Y – C =₹ 1,000 – 750 = ₹250
APS = \(\frac{\mathrm{S}}{\mathrm{Y}}=\frac{250}{1,000}\) = 0.25
Question 3.
The value of the investment multiplier varies between one and infinity. Justify the given statement.
Answer:
Since,K = \(\frac{1}{1-\mathrm{MPC}}\)
Hence, even if the MPC will have its minimum value, i.e. zero, the investment multiplier will be 1. Similarly, when MPC = 1, the value of investment multiplier is infinity. So, we can say that the value of investment multiplier varies between 1 and infinity.
Question 4.
What is the state of rural infrastructure in India?
OR
Determine the distribution of employment from the graph given below:
Answer:
State of infrastructure in rural India can be understood from the following points:
(a) In spite of the technological progress, woman of rural India are still using biofuels to meet their daily energy requirements. About 90% of the rural households use bio-fuels for cooking.
(b) The Census of 2001 shows that in rural India, only 56% of households have an electricity connection and 43% still use kerosene.
(c) Tap water availability is limited to only 24% rural households. About 76% of the population drinks water from open resources such as well, ponds, etc. Women go long distances to fetch water for their basic needs.
(d) Access to improved sanitation in rural areas was only 20%.
OR
According to the given graph:
(a) The self-employed accounts for 40% of the workforce in urban areas, the self-employment contributes towards the major source of livelihood in the urban areas.
(b) The casual workers account for 37% of the workforce in rural area and 18% of workforce in urban area.
(c) The regular salaried employees accounts for 40% of the workforce in urban area and only 7% for rural area. This indicates that more employment opportunities are available in urban areas.
Question 5.
Infrastructure is a major component that contributes in the economic development of the country. Justify the given statement with the valid argument.
Answer:
Infrastructure contributes to the economic development of a country and it is an important determinant of its growth and development. It raises productivity induces investment in different areas of economic activity, raises size of the market, facilitates outsourcing and employment. Thus, it is an essential support system for the economic development of the country.
Question 6.
Giving valid reasons explain which of the following will not be included in the estimation of National Income:
(a) Payment of interest by a firm to a bank
(b) Payment of interest by a bank to an individual
(c) Payment of interest by an individual to a bank
OR
If nominal income is ₹ 500 and price index is 125, calculate real income.
Answer:
(a) Payment of interest by a firm to bank will be included in the National Income. This is because the firm would have taken loan for productive purposes.
(b) Payment of interest by a bank to an individual will be included in the National Income. This is because the bank would have used the savings of the individuals (on which the loan is paid) for productive purposes.
(c) Payment of interest by an individual to a bank vi11 not be included in the National Income. This is because the individual is expected to have taken a loan for consumption purposes rather than for productive purposes.
OR
Real Income = (Nominal Income ÷ Price Index of current year) x Price Index of base year.
Let the base year’s price index he loo.
Real Income (500 ÷ 125) x 100
= 4 x 100
= ₹ 400
Question 7.
The following table shows distribution of workforce in India for the year 1972-73. Analyse the data and give reasons for the nature of. workforce distribution.
Read the following text carefully and answer the question number 8 and 9 given below:
The top economic body of Pakistan, Economic Coordination Council (ECC) lifted the ban on Import of Cotton and Sugar from India after 2 years when India took the decision to scrap Article 370 in 2019. India is the world’s largest producer of cotton and the second-largest producer of sugar. Pakistan was one of the leading buyers of Indian cotton and sugar until 2019.
Trade relations between the two nations have always been linked to their political relationship. Terrorist attacks in Uri in 2016, surgical strikes by India and Article 370 were some of the issues that led Pakistan to suspend bilateral trade with India in August 2019. India also imposed 200% tariff on imports from Pakistan and revoked its status as Most Favoured Nation after attack on CRPF in Pulwama. Pakistan also revoked India’s status as MFN and hike duties on its goods.
Trade between the two countries suffered greatly in 2019-20 with India’s Exports to Pakistan dropped nearly 60.5% and imports dropped around 97%.
Answer:
From the given table, following points can be noticed about the nature of workforce distribution:
(a) Majority of the workforce was residing in the rural areas in India in the year 1972-73. The total workforce was 233 million out of which 194 million workers were from rural areas and 39 million from the urban areas. Thus, 83% of the total workforce was rural as compared to 17% of the urban workforce. The reason for this was that a majority of population was living in rural areas during that period.
(b) The rural workforce comprises of 64% of the male workf orce and 36% of female workforce. On the other hand, the urban workforce comprises of about 82% of male workforce and 18% of female workforce. This shows that participation of males in both rural as well as urban areas is higher than that of the females because of lack of opportunities available to women for acquiring education and also the social structure and family norms which did not encourage women to work.
(c) Another feature of workforce distribution is the difference between urban female workforce and rural female workforce. Females in the rural areas formed 36% of the workforce, whereas, the females in the urban areas formed only 18% of the workforce.
This may be attributed to the fact that where men are able to earn high incomes, families discourage female members from taking up jobs. Earnings of urban male workers are generally higher than rural males and so the urban families do not want females to work. Thus, it can be concluded by analyzing the above table that majority of the workforce was from the rural areas and there was low female participation rate in the workforce during that period.
Question 8.
Discuss the implications of lifting of ban on import of sugar and cotton by Pakistan on its economy.
Answer:
(a) Import of cotton from India will certainly help the textile industry of Pakistan to flourish because imports from other countries like the US and Brazil have been more expensive for Pakistan and take longer time to arrive as compared to India. Pakistan use cotton to produce quality fabrics for export. It helps to stabilize the market price of sugar. It is one of the essential commodities.
(b) Import of sugar is also cheaper from India as compared to other countries. These steps will help the domestic manufacturers of Pakistan to reduce their cost of production with quality.
Question 9.
State any two ways in which Indian economy will benefit from this step.
Answer:
(a) Export of cotton and sugar will increase because of huge demand of Indian cotton and sugar in Pakistan. It will lead to surplus in trade balance of India.
(b) For agricultural commodities, both countries are interdependent, especially at the time of crisis shortfall. So, trade relations between both the nations will improve.
Question 10.
What is meant by aggregate demand? State its components.
Answer:
Aggregate Demand (AD) refers to the total expenditure on consumption and investment by different sectors of the economy.
Aggregate Demand comprises of the following components:
(a) Private Consumption Expenditure (C): Household expenditure on goods and services during an accounting year is called consumption expenditure. It depends upon the level of income of the households.
(b) Investment Expenditure (I): Investment expenditure is the expenditure on goods by private investors, which add to their capital stock. These goods include producers’ durable, equipment, new construction and change in inventories.
(c) Government Expenditure (G): Government expenditure, both consumption and investment, on public goods such as opening of schools, construction of roads, maintaining law and order, providing justice, etc.
(d) Net Exports (X – M): Net exports is the difference between total imports and total exports.
Question 11.
What is monetary policy? Explain the role of
(i) Bank rate and
(ii) Margin requirements in influencing the availability of credit in an economy.
Answer:
Monetary policy is the policy relating to the regulation of supply of money, rate of interest, and availability of money, with a view to combat the situation of inflationary or deflationary gap in the economy. This policy is generally adopted by the Central Bank of the country.
(a) Bank Rate: It is the rate at which the Central Bank offers loan to the commercial banks as ‘lender of last resort. During inflation, bank rate is increased to reduce the money supply in the economy because commercial banks will also increase the interest accordingly. It will keep a check on the borrowing from commercial banks. Thus, overall supply of money/credit is reduced in the economy. During deflation, bank rate is lowered leading to increase in supply of money/credit.
(b) Margin requirements: A margin is the difference between market value of the security offered for loan and the amount of loan offered by the commercial bank. During inflation, supply of money/ credit is reduced by raisins the requirement of margin and vice-versa.
Question 12.
(a) Calculate National Income.
| Items | (₹ in crores) |
| (i) Personal tax | 80 |
| (ii) Private final consumption expenditure | 600 |
| (iii) Undistributed profits | 30 |
| (iv) Private income | 650 |
| (v) Government final consumption expenditure | 100 |
| (vi) Corporate tax | 50 |
| (vii) Net domestic fixed capital formation | 70 |
| (viii) Net indirect tax | 60 |
| (ix) Depreciation | 14 |
| (x) Change in stocks | (-)10 |
| (xi) Net imports | 20 |
| (xii) Net factor income to abroad | 10 |
(b) Distinguish between stocks and flows. Give an example of each.
OR
(a) Calculate National Income and GDPMp by the income method using the following information:
| Items | (₹ in crores) |
| (i) Private final consumption expenditure | 1,300 |
| (ii) Net factor income earned from abroad (NIFA) | 50 |
| (iii) Mixed income of self-employed | 500 |
| (iv) Subsidies | 100 |
| (v) Indirect tax | 200 |
| (vi) Consumption of fixed capital | 1,000 |
| (vii) Operating surplus | 5,000 |
| (viii) Compensation of employees | 1,500 |
(b) Explain Circular Flow of Income in a two-sector economy.
Answer:
(a) National Income Private final consumption expenditure + Government final consumption expenditure + (Net domestic fixed capital formation + Depreciation + Change in stock) – Net imports – Depreciation – Net indirect taxes – Net factor income to abroad National Income
= 600+100+(70+14-10)-20-14-60-10
National Income = ₹ 670 crore
(b)
| Stock | Flow |
| 1. Stock refers to the value of a variable at a point of time. |
Flow refers to the value of a variable during a period of time. |
| 2. It is measured at a specific point of time. | It is measured per hour, per month or per year. |
| 3. Stock impacts the flow. Greater the stock of capital greater is flow of goods and services. | Flow impacts the stock, greater the flow of income, greater is the stock of wealth with the people. |
| 4. Example: Capital and quantity of money. | Example: Export and imports. |
OR
(a) By income method:
National Income (NNPFC) = Compensation of Employees + Operating Surplus + Mixed Income +NFIA
= 1500 + 5000 + 500 + 50 = ₹ 7050 crores
GDPMP = NNPFC + Consumption of fixed capital (Depreciation) – NFIA + NIT (Net indirect tax)
=7050+1000-50+100
= ₹ 8100 crores
NNPFC = ₹ 7050 Cr.
GDPMP = ₹ 8100 Cr.
(b) Circular flow of income in a two-sector economy: In a two-sector economy, households are the owners of factors of production. They provide factor services (in the form of labour, capital, land, and entrepreneurship) to the firms. Firms produce goods and services and make factor payments (in the form of wages and salaries, interest, rent, and profit) to the households. So, factor payments flow from firms to households.
The factor income earned by the households will be used to buy the goods and services produced by the firms, for which they make payments to the firms. So, consumption expenditure (i.e., spending on goods and services) flows from households to the firms. Thus, aggregate final consumption expenditure by the households in the economy is equal to the aggregate factor income received by the households.
Question 13.
(a) It has been realized that labour force participation rate is very low in India. As an economist, suggest the measure to raise labour force participation rate.
(b) A study estimates that medical costs alone push down 2.2% of the population below the poverty line each year. In the light of the above statement discuss how.
Answer:
(a) I would suggest the following measures to raise the labour force participation rate:
- There should be drastic reduction in birth and death rates to improve the age structure of the population.
- There should be more and more opportunities for women to participate in economic activities.
- The general standard of health of the population must be raised.
- Employment opportunities should be increased.
(b) Public health facilities are highly inadequate in our country. These facilities are also lacking in quality. So even poor and middle-class people do not prefer to use these facilities. So, in case of a medical emergency, they are forced to avail expensive services of private hospitals and health centers. These expenses prove to be a heavy burden on these families and they are forced to sell whatever valuables they have, to fund the treatment. This pushes the families below the poverty line.