Students can access the CBSE Sample Papers for Class 12 Economics with Solutions and marking scheme Term 2 Set 3 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 12 Economics Standard Term 2 Set 3 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 Marginal Propensity to Consume and Average Propensity to Consume.
OR
Difference between Autonomous and Induced Consumption.
Answer:
| Basis | Marginal Propensity to Consume (MPC) | Average Propensity to Consume(APC) |
| Meaning | The ratio of the change in consumption expenditure and the change in income is called the Marginal Propensity to Consume. | The ratio of the total consumption expenditure arid total income, at a given level of income is called as Average Propensity to Consume. |
| Represents | It represents the part of increased income which is spent on consumption. | It represents the part of total Income which is spent on consumption. |
| Symbolically | MPC = \( \frac{\text { Change in Consumption }(\Delta C)}{\text { Change in income }(\Delta Y)} \) | APC = \(\frac{\text { Total Consumption }(\mathrm{C})}{\text { Total income }(\mathrm{Y})} \) |
OR
| Autonomous Consumption | Induced Consumption |
| (a) When consumption occurs even at zero level of income, this is called as Autonomous Consumption. | When consumption increases with the increase in income is known as Induced Consumption. |
| (b) It is generally done in government sector. | It is generally done in private sector. |
| (c) It is income inelastic, i.e., it is not affected by change in income level, | It is income elastic, i.e., it is affected by change in income level. |
Question 2.
In an economy, the ratio of Average Propensity to Consume and Average Propensity to Save is 5 : 3. The level of income is ₹ 6000. How much are the savings? Calculate.
OR
If the value of Average Propensity to Consume is 1.5, what will be value of Average Propensity to Save?
Answer:
Here, \(\frac{\mathrm{APC}}{\mathrm{APS}}\) = \(\frac{5}{3}\) and Y = 6000, APC = \(\frac{5}{8}\) ,
APS = \(\frac{3}{8}\)
Now, as
\(\frac{\mathrm{APC}}{\mathrm{APS}}=\frac{5}{3}\)
So, ratio of consumption to income (APC) = \(\frac{5}{5+3}=\frac{5}{8}\)
Now, C= \(\frac{5}{8}\) x 6000
= ₹ 3750
Hence, Saving(s) =6000—3750
= ₹ 2250
OR
Here, APC = 1.5
Now, we know that, Al’S = 1 – APC
So,APS=1-1.5=-0.5
Question 3.
The problem of double counting in the computation of National Income can be removed. Justify the statement and state any two approaches to correct the problem of double counting.
Answer:
Double counting means counting of the value of the same product more than once while calculating the National Income.
Two ways to avoid the problem of double counting are:
(a) Take the value of final goods only: According to this method, the value of intermediate goods is not considered. Only the value of final goods should be added to determine the National Income.
(b) Adopt value-added method: According to this method, sum total of the value added by each production unit should be taken in the computation of National Income.
Question 4.
What is meant by sustainable development? Discuss briefly any two strategies of sustainable development.
OR
On the basis of the graph given below, analyze the distribution of employment in region.
Distribution of Employment by Region (1999-2000)
Source: Indian Economic Development (NCERT)
Answer:
Sustainable development: It refers to that development which will allow all future generations to have an average quality of life; the aim is to ensure that present generation should leave quality of life for next generation. The term sustainable development has its origin in IUCN (International Union for the Conservation of Natural Resources).
Strategies of sustainable development:
(a) Use of cleaner fuels: In urban areas, use of CNG is being promoted to be used as fuel. In Delhi, use of CNG in public transport has significantly lowered air pollution. In rural areas, households generally use wood, dung cake or other biomass as fuel. These fuels have several adverse implications like deforestation, reduction in green cover, wastage of cattle dung, and air pollution. To overcome this problem, use of LPG and global gas is being promoted as they are cleaner fuels.
(b) Establishment of Mini-Hydel Plant: In mountain regions, perpetual streams can be found almost everywhere. These streams can be used to generate electricity through mini-hydel plants. These power plants are more or less environment friendly and generate enough power to meet local demands. Moreover, large-scale transmission towers and cables are also not required in such plants.
OR
Distribution of Employment by Region:
Distribution of employed workers by region enables us to know the quality of employment and the attachment of workers to their jobs.
(a) Self-Employment: It is a major source of livelihood in both urban areas (42%) and rural areas (56%). But, in case of rural areas, self-employed workers are greater as majority of rural people are engaged in farming on their own plots of land.
(b) Casual Workers: In case of rural areas, casual workers account for second major source of employment with 37% of workforce. Casual workers in urban areas account for 18% of total workforce.
(c) Regular Salaried Employees: In urban areas, it is the second major source with 40% of workforce. Urban people have a variety of employment opportunities because of their educational attainments and skills. In urban areas, the nature of work is different and enterprises require workers on a regular basis. However, only 7% of rural people are engaged as regular salaried employees due to illiteracy and lack of skills.
Question 5.
The opportunity costs of negative environmental impact are high. Justify the given statement with a valid argument.
Answer:
The negative environmental impact has high opportunity costs as explained below:
(a) The industrial development in past has polluted and dried up rivers and other aquifers making water an economic good. Also, cleaning up of polluted rivers and replenishing water resources require huge investments.
(b) The intensive and extensive extraction of both renewable and non-renewable resources has exhausted some of these resources. Huge amount of funds need to be spent on technology and research to explore new resources.
(c) The health costs of degraded environmental quality are also rising as decline in air and water quality has resulted in increased incidence of respiratory and water-borne diseases.
(d) 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.
Question 6.
Giving valid reason explain how these transactions be treated in estimation of National Income:
(a) Expenditure by a firm on payment of fees to a chartered accountant.
(b) Payment of corporate tax by a firm.
(c) Purchase of refrigerator by a firm for own use.
OR
If NDPFC is ₹10,000 crores and NFIA is (-) ₹500 crores, how much will be the National Income?
Answer:
(a) The services of chartered accountants hired by the firm should not be included in the estimation of National Income. This is because it forms a part of the firm’s intermediate consumption.
(b) Payment of corporate tax is not included in the National Income as it is a mere transfer payment from the firm to the government. It is a part of corporate profits which already form a part of National Income, therefore, it should not be separately included in National Income (in addition to corporate profits).
(c) Purchase of refrigerator by a firm for own use will be included in the National Income as it is regarded as final consumption expenditure.
OR
National Income = NDPFC + NIFA
= ₹ 10,000 + (-500)
= ₹ 9,500 crores
Question 7.
Study the following information and compare the productivity of principal crops with India and other advanced countries and analyze its impact on industrial development with valid arguments.
Productivity of Principal Crops
Source: Agricultural Census Statistics 2016
Read the text carefully and answer the question number 8 and 9 given below.
India’s imports of 5.87 billion dollars from China were more than collective purchases from the US and the UAE together. And India’s exports to China grew 11% to 19 billion dollars in 2020. It has led to ballooning of trade deficit with China at 40 billion dollars.
Traders’ Body Confederation of All India Traders ( CAIT) which claims to represent 7 crore traders and 40000 trade associations have been campaigning against Chinese goods, vowing to boycott as many as 3000 items.
Government has also taken several steps to curb imports from China like ban on hundreds of Chinese mobile apps, including popular ones like TikTok, increased scrutiny on Chinese investments in India. Despite the heightened tensions between the two countries, China has emerged as India’s biggest trading partner in the first nine months of FY 2021.
Question 8.
Express your views about why imports have grown from China?
Answer:
Imports have increased from China because of the following reasons:
(a) Failure of Make in India project launched by the government did not lead to increase production in
the domestic boundary of country which led to increased imports.
(b) Increased prices in India restricted the domestic manufacturers to compete with Chinese products.
(c) Lack of willingness on part of Indians to prefer indigenous goods rather than Chinese goods.
Question 9.
Discuss the steps India can take to reduce imports from China.
Answer:
India can take the following steps to reduce imports from China:
(a) Policy of Export Substitution can be adopted i.e., producing those goods in domestic boundary which India imports from China.
(b) Tax incentives and subsidies can be given to domestic manufacturers.
(c) Campaigning about preference of indigenous products like use of Earthen lamps instead of Chinese lights.
Question 10.
How can deficient and excess demand be corrected by change in taxes?
Answer:
Change in taxes helps to correct excess demand in the following ways:
(a) Decrease in Taxes: Decrease in taxes increases the income of public, which increases ‘their purchasing power. As a result, demand for goods and services increases. This can correct deflationary gap or deficient demand. Taxes should be progressive i.e. higher rate of tax for rich people than poor people.
(b) Increase in Taxes: Increase in taxes (direct and indirect) will decrease the purchasing power of consumers and producers. This will decrease the Aggregate Demand. Therefore, government should implement new taxes for solving the problems of excess demand or inflationary gap or government should increase the rate of taxes.
Question 11.
An inflationary gap can be reduced in an economy. State three measures to reduce the inflationary gap to justify the given statement.
Answer:
Inflationary Gap: The extent to which current aggregate demand becomes higher than the aggregate supply at the level of full employment, is termed as inflationary gap.
Given below are the three measures to reduce inflationary gap:
- Reduction in government expenditure on public works, public welfare and defence, etc.
- Reduction in public expenditure on transfer payments and subsidies.
- Increase in taxes to lower the disposable income with the people.
- Restricted deficit financing to check the flow of money in the economy.
Question 12.
(a) From the given data, calculate Net National Product at factor cost (NNPFC) by expenditure method.
| Items | (₹ in crores) |
| (i) Private final consumption expenses | 11,000 |
| (ii) Compensation of employees | 800 |
| (iii) Net factor income from abroad | (-) 1150 |
| (iv) Gross domestic capital formation | 300 |
| (v) Consumption of fixed capital | 450 |
| (vi) Net indirect taxes | 225 |
| (vii) Opening stock | 450 |
| (viii) Mixed income of self-employed | 350 |
| (ix) Government final consumption expenditure | 450 |
| (x) Profits | 550 |
| (xi) Exports | 225 |
| (xii) Closing Stock | 850 |
| (xiii) Imports | 150 |
| (xiv) Rent | 490 |
| (xv) Interest | 625 |
(b) Differentiate between personal income and private income.
OR
(a) Calculate the Net National Product at market price.
| Items | (₹ in crores) |
| (i) Mixed income of self-employed | 8,000 |
| (ii) Depreciation | 200 |
| (iii) Profit | 1,000 |
| (iv) Rent | 600 |
| (v) Interest | 700 |
| (vi) Compensation of employees | 3,000 |
| (vii) Net indirect taxes | 500 |
| (viii) Net factor income to abroad | 60 |
| (ix) Net exports | (-) 50 |
| (x) Net current transfers to aboard | 20 |
(b) What precautions should be considered while estimating National Income by Income Method?
Answer:
(a) National Income (NNPFC) = Private final consumption expenses + Government final consumption expenditure + Gross domestic capital formation + (Closing stock – Opening stock) + ( Exports
Imports) + Consumption of fixed capital + Net factor income from abroad – Net indirect taxes
= 11,000 + 450 + 300 + (850-450) + (850- 150) + 450 + (-1150)-225
= 11,750+400+700+450-1,150-225
= 13,300 – 1,375
= ₹ 11,925 crores
| Personal income | Private income |
| It is the sum total of earned and transfer incomes received by the individuals from the income sources involved within and outside the nation. Personal income is calculated as follows: | It can be contemplated as the factor and transfer of the income received from all the private sources within and outside the country. |
| Personal income = Private income – Corporate tax – Corporate savings (undistributed profits) | It is calculated as Private income = Private sector income + NFIA + All transfer incomes |
OR
(a) NDPFC = COE + MI + OS (Rent + interest + profit)
= (vi) + (i) + (iv) + (v) + (iii)
=3,000+8,000+600+700+1,000
= ₹ 13,300 crores
NNPMP = NDPFC – (viii) + (vii)
= 13,300-60+500
= ₹ 13,740 crores.
(b) Precautions that are taken while estimating National Income by income method are:
(i) Transfer incomes (like scholarships, donations, charity, old-age pensions, etc.) are not included in the National Income because such receipts are not connected with any productive activity, and there is no value addition.
(ii) Income from the sale of second-hand goods will not be included in National Income as their original sale has already been counted. If they are included again, it will lead to double counting. However, any brokerage or commission received by brokers or commission agents on the sale of such goods will be included as it is an income received for rendering effective service.
(iii) Income from the sale of shares, bonds, and debentures will not be included as such transactions do not contribute to the current flow of goods and services. These financial assets are mere paper claims and involve a change of title only. However, any commission or brokerage on such financial assets is included as it is an effective service.
(iv) Windfall gains (like income from lotteries, horse races, etc.) are not included as no productive activity is done.
(v) Imputed value of services provided by owners of production units will be included. The imputed value of owner-occupied houses, interest on own capital, production for self-consumption, etc., will be included as these are productive activities and add to the flow of goods and services.
(vi) Payments out of past savings (like death duties, gift tax, wealth tax, etc.) are not included in the National Income because they are paid out of wealth or past savings and do not add to the current flow of goods and services.
(vii) Indirect Taxes (like sales tax, excise duty, customs duty, etc.) are not included in National Income at factor cost. However, they are included in National Income at market price.
Question 13.
(a) Infrastructure contributes to the economic development of a country. Do you agree with the given statement? Give reason in support of your answer.
(b) Unemployment is an economic as well as a social problem. Comment on the given statement.
Answer:
(a) Yes, infrastructure acts as a support system for production activity in the economy and, thereby, contributes to economic development.
(i) Infrastructure increases productivity: The availability of quality infrastructure guarantees increase in production and productivity. Infrastructure ensures easy movement of goods and raw materials thereby reducing inefficiencies and lead to efficient utilization of scarce resources and eliminate wastages.
(ii) Infrastructure encourages investment: Infrastructure provides an environment conducive to investment while lack of infrastructural facilities discourage investment. For example, an investor will not invest in absence of basic infrastructures such as transport and communication.
(iii) Infrastructure generates linkages in production: Infrastructure promotes economic development by way of various forward and backward linkages. In other words, infrastructure provides scope for expansion of one industry due to the expansion of the other by way of forward and backward linkages. The process of economic growth becomes a dynamic process in the presence of sufficient infrastructure facilities.
(iv) Infrastructure enhances size of the market: Infrastructure widens the size of the market. The fast and cost-effective movement of raw materials and finished goods in bulk enables a producer to offer his products across the country and even across international boundaries.
(b) Unemployment is both an economic and a social problem. Unemployment is an economic problem in the sense that unemployed persons will be consumers only without being a producer. Non- utilization of human resources due to unemployment involves double cost of maintenance and loss of output. Unemployment is a social problem in the sense that it causes enormous suffering to unemployed workers due to their reduced or zero income. Many social evils like dishonesty, immorality, drinking, gambling, robbery, etc are the outcome of unemployment, It causes social disruption in the society and the government has to incur heavy unproductive expenditure on law and order.