CBSE Sample Papers for Class 12 Economics Term 2 Set 7 with Solutions

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CBSE Sample Papers for Class 12 Economics Standard Term 2 Set 7 with Solutions

Time Allowed: 2 Hours
Maximum Marks: 40

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 ex-ante investment and ex-post investment.
OR
Distinguish between induced and autonomous investment.
Answer:

Basics	Ex-ante Investment	Ex-post Investment
Meaning	It refers to the planned or intended investment during a particular period of time.	It refers to the actual level of investment during a particular period of time.
Importance	It is imaginary (intended), in which a firm assumes the level of investment on its own.	It is factual or original that signifies the existing investment of a particular time.
Time	It is planned on the basis of future expectations.	It is the actual result of variables.

Basis	Autonomous investment	Induced investment
Relation with income	Autonomous investment is unaffected by the level of income.	Induced investment is positively influenced by the level of income.
Motive	Economic stability	Profit earning
Elasticity	Income inelastic	Income elastic
Determined by	Consideration of economic welfare	Consideration of profit
Investment curve	Horizontal straight line parallel to X-axis	Positively sloped

Question 2.
Calculate the equilibrium level of income in the economy.
C = 500 + (0.9)Y; Investment expenditure = 3,000
OR
Calculate investment expenditure from the following data about an economy which is in equilibrium where National Income = ₹1,000, Marginal Propensity to Save = 0.20 and Autonomous consumption expenditure = ₹100.
Answer:
Given C = 500 + (0.9)Y, Investment expenditure, (I) = ₹3,000;
At equilibrium level, Y = C + I
⇒ Y = 500 + (0.9) Y + 3,000
⇒ Y – (0.9) Y = 3,500
⇒ (0.1)Y = 3,500
Y = $\frac{3,500}{0.1}$ = 35,000
Therefore, equilibrium level of income = ₹35,000.
OR
Given, National Income(Y) = 1,000, Marginal Propensity to Save (MPS) = 0.20,
Autonomous consumption expenditure ($\bar{C}$) = 100
MPC = 1 – MPS
= 1 – 0.20
= = 0.8
We know that Y = C + I
Since, C = $\bar{C}$ + cY
We have, Y = $\bar{C}$ + cY + I
1,000 = 100 + 0.8 (1,000) + I
1,000 = 900 + I
I = 100
Therefore, investment expenditure is ₹100.

Question 3.
“Gross Domestic Product (GDP) is not the best indicator of the economic welfare of a country. Justify the given statement with valid reasons.
Answer:
Yes, Gross Domestic Product (GDP) is not the best indicator of the economic welfare of a country.”
(a) Distribution of GDP: If the GDP of the country is rising, it is not necessary that the welfare will also rise. This is because with every increase in the level of GDP, it is not necessary that distribution of
income is also equitable. Increase in GDP may be a result of increase in income of a few individuals.
K On the other hand, the majority of people remain deprived of the benefits of the rise in GDP.

(b) Non-monetary exchanges: In the rural economy, the barter system of exchange still prevails to some extent. Payments for farm labour are often made in kind rather than in cash. All such transactions remain unrecorded which causes underestimation of GDP.

Question 4.
How can we increase the effectiveness of healthcare programmes?
OR
Analyse the recent trends in sectoral distribution of workforce in India.

Answer:
We can increase the effectiveness of healthcare programmes in the following manner:
(a) The wide gap between rural and urban areas, poor and rich in utilising health care facilities must be addressed through more investment in health facilities in rural and backward areas by the government as private investment is not forthcoming in these areas.

(b) Women’s health across the country should be taken into greater focus as a healthy mother gives birth to a healthy off spring and health status of population can be improved.

(c) Regulated private sector health services, NGOs and community participation can improve the effectiveness of health care facilities and play an important role in spreading health awareness.

(d) Indian system of medicine including ayurveda and naturopathy should be explored and used to support public health as they are based on natural healing” and are of preventive nature.
OR
The given data indicates that over the given period, the proportion of workforce in primary sector has gone down significantly. Whereas, the employment share of both secondary sector and the service sector has increased gradually.

While the share of secondary sector has gone up by approximately 9% recently, the corresponding figure for service sector has gone up by approximately 7.1%. This also shows that dependency on agriculture remained high as secondary and service sector wasn’t created enough employment.

Question 5.
Children below 15 years of age and the old people beyond 60 years are not considered while counting the number of unemployed. Do you agree? Justify the given statement.
Answer:
Yes, I agree that children below 15 years of age and the old people beyond 60 years are not considered while counting the number of unemployed because these persons cannot become part of labour force even when they are able and willing to work.

Question 6.
Suppose the GDP at market price of a country in a particular year was ₹1,100 crores. Net factor income from abroad was ₹100 crores. The value of Indirect taxes – Subsidies was Cl 50 crore and National Income was ₹850 crores. Calculate the aggregate value of depreciation.
OR
Giving reason stating how the following are treated in 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.
Answer:
National Income (NNP_FC) = ₹850 crore
GDP_MP = ₹1100 crore
NIFA = ₹100 crore
Net indirect taxes = ₹150 crore
NNP_FC = GDP_MP + NIFA – Depreciation – Net indirect tax
By putting value
850 = 1100 + 100 – Depreciation – 150
Depreciation = ₹200 crore
OR
(a) Payment of interest by a firm to a bank: It will be ‘included’ in the estimation of National Income, as it is a factor income. Also, firms take loans for investment purposes.

(b) Payment of interest by a bank to an individual: It will be ‘included’ in the estimation of National Income as it is a factor income.

(c) Payment of interest by an individual to a bank: It will ‘not be included’ in the estimation of National Income as consumer takes a loan for consumption purposes.

Question 7.
Study the following information and analyse the ‘Distribution of Employment on the basis of Gender’.

Read the following text carefully and answer the question number 8 and 9 given below:
Indo-Sino relation
Border disputes between India and China are not a new thing. However, unlike the 1960s, when the two economies were practically irrelevant in the global order, today, things are completely different. China and India not only account for 2.7 billion people – roughly 40% of the 7.5 billion people on the planet – but are also two of the biggest economies in the world.

It is another matter that at a per capita GDP level, both countries are relatively “poor” when compared to some of the most developed economies. For instance, as of 2018, the per capita GDP of the United States was $54,659 while that of Sweden was even higher at $57,966. In comparison, China (at $7,752) and India (at $2,100) lag far behind. India, in particular, is the worst of the lot. China’s per capita GDP is roughly 4 times India’s; the US and Sweden’s are a whopping 26 and 27 times. This shows how far an average Indian is from an average Chinese or American. That is why economists repeat it ad nauseam that India has to grow rapidly for several decades at a stretch if it wants the average level of lifestyle to reach anywhere close to the developed world.

In this context, the spilling over of the latest border dispute between these two Asian giants into the economic sphere is particularly ill-timed. Hurt by China’s aggression, several Indians, including many in the government, have argued in favour of boycotting the use of Chinese products. However, for a variety of reasons, this strategy, while targetting China, is likely to hurt India far more.

For one, contrary to perception, India imports a lot of intermediate goods from China, and stopping that trade will affect our ability to produce finished goods. The Indian Express found companies across import- dependent sectors such as automobile, pharmaceuticals, electronics, telecommunications, etc. claiming that any move in this direction could be counter-productive, impacting the overall competitiveness of the Indian manufacturing sector and undermining our competitiveness to export.
Many readers have asked if that means India should resign to becoming a “slave” to Chinese imports. Thankfully, the answer is “No”. But, the path to overcoming our dependence on Chinese goods – or for that matter, imports of any other country – requires Indian policymakers and businesses to put in real hard work and not resort to lazy solutions such as banning trade or raising tariff barriers.

The first thing to understand is that India’s poor share in global trade, especially on goods, is a reflection of our acute lack of competitiveness. This is the harsh truth but far too often, instead of accepting this reality, policymakers have blamed India’s stagnant exports performance on weak global demand.

An analysis by HSBC in late 2016 showed that weak global demand explained only 33% of the slowdown in Indian exports. The biggest culprits were “domestic bottlenecks” – explaining 50% of the slowdown. The remaining 17% was blamed on an overvalued rupee.

The impact of domestic bottlenecks (such as poor infrastructure, lack of reliable electricity, logistical delays, regulatory hurdles, problems in enforcing contracts etc.) was higher still – 60% – when one looked at only the trade in goods (that is, by leaving aside the trade in services).

There’s little any individual country can do about global growth or demand – that’s a factor which is the same for all nations. What matters then are domestic bottlenecks and rupee exchange rate.

On the exchange rate, the jury is still out. Some argue that a cheaper rupee would make our exports more competitive – and that seems fairly straightforward. Others argue that a stronger rupee will help us import intermediary goods at a cheaper price thus helping our export competitiveness.
Answer:
The above chart shows the distribution of employment by gender, i.e., male and female. The chart shows that self-employment is a major source of livelihood for both men and women as this category accounts for more than 50 per cent of the workforce, i.e., 52 per cent for males and 52 per cent for females. Casual wage work is the second major source for both men and women, which is 24 and 27 per cent respectively. When it comes to regular salaried employment, both women and men on share of 24 per cent and 21 per cent. The gap between men and women is very less.

Question 8.
Outline and discuss any two consequence which China has edge over India?
Answer:
China has edge over India as:
(a) Inward looking policy of self-sufficiency and protection of domestic industry from foreign competition has gradually been replaced by the new policy.

(b) It allowed the foreign investor the freedom to ‘hire and fire’ the workers. It also offered them a lucrative infrastructure.

Question 9.
Is ‘Make in India campaign’ make India to become a global trading partner? Comment.
Answer:
Yes. ‘Make in India Campaign’ make India globally partner as:
(a) The make in India campaign will lead to an increase in exports and manufacturing. An increase in exports will improve the economy and India will be transformed into a global hub of manufacturing through global investment using the current technology. Manufacturing will also boost India’s economic growth and GDP.

(b) Make in India is an open invitation to manufacturers present in every corner of the world. For inviting as many manufacturers as possible, the government has removed many restrictions.

(c) It will welcome more FDI. Since the government had promised to improve the ease of running businesses in India, it is going to attract FDI.

Question 10.
‘When in an economy, aggregate demand exceeds aggregate supply, the demand is said to be a deficient demand.’ Do you agree with this statement? State the effect of demand on price, output and employment in the light of above statement.
Answer:
No, when in an economy, aggregate demand exceeds aggregate supply, the demand is said to be an excess demand. Effects of excess demand are:
(a) Increase in general price level: Excess demand rise general price level, it arises when aggregate demand is more than aggregate supply at a full employment level.

(b) Output: Excess demand has no effect on the level of output because the economy is at full employment level and there is no idle capacity in the economy.
(c) Employment: There will be no change in the level of employment also. The economy is already operating at full employment equilibrium, and hence, there is no unemployment.

Question 11.
‘Open market operations’ offer a valid solutions to the problem of deflationary gap in an economy. Justify the statement by defining deflationary gap.
Answer:
Deflationay gap is the shortfall in aggregate demand from the level required to maintain full employment equilibrium in the economy. It causes deficient demand in the economy. Owing to deficient demand, planned level of output is reduced. Along with reduction in the level of output, level of income and employment also tend to reduce. The economy is driven into a state of low level equilibrium trap.

Open market operations is the policy that focuses on increasing and decreasing the stock of liquidity (or cash balances) with the people as well as with the commercial banks, through sale and purchase of securities by the Central Bank. During the situation of deflationary gap, when cash balances need to be increased (to stimulate the level of aggregate demand), the Central Banks starts buying securities. Purchase of securities injects purchasing power into the money market.

Question 12.
(a) Calculate Net National Product at Market Price from the following data:

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 abroad	20

(b) Differentiate between ‘Real GDP’ and ‘Nominal GDP’.
OR
(a) From the following data, calculate “Net Value Added at Factor Cost”:

Items	(₹ in lakhs)
Sales	400
Change in Stock	(-) 20
Intermediate consumption	200
Net indirect taxes	40
Exports	50
Depreciation	30

(b) State any precautions that are taken while calculating National Income by expenc iture method.
Answer:
(a) Net Domestic Product at Factor Cost (NDP_FC) = Compensation of Employees + Rent + Interest + Profit + Mixed Income of Self Employed
= 3,000 + 600 + 700 + 1,000 + 8,000 = ₹13,300 crores.

Net National Product at Market Price (NNP_MP)
= NDP_FC – Net Factor Income to Abroad + Net Indirect Taxes
= 13,300 – 60 + 500
= ₹13,740 crores

Basis for Comparison	Nominal GDP	Real GDP
Meaning	The aggregate market value of the economic output produced in a year within the boundaries of the country is known as Nominal GDP.	Real GDP refers to the value of economic output produced in a given period, adjusted according to the changes in the general price level.
What is it?	GDP without the effect of inflation.	Inflation adjusted GDP
Expressed in	Current year prices	Base year prices or constant prices.
Value	Higher	Generally, lower.
Uses	Comparison of various quarters of the given year can be made.	Comparison of two or more financial year can be done easily.
Economic Growth	Cannot be analysed easily.	Good indicator of economic growth.

OR
(a) Value of output = Sales value + Change in stock
= ₹400 – ₹20 = ₹380 lakhs.
GVA_MP = Value of Output – Intermediate Consumption
= ₹380 – ₹200 = ₹180 lakhs.
NVA_FC = GVA_MP – Depreciation – Net indirect taxes
= ₹80 – ₹30 – ₹40 = ₹110 lakhs.

(b) While using the expenditure method, the following precautions are required to be taken, related to
the calculation of National Income:
(i) Only final expenditure is to be taken into account to avoid the error of double counting of expenditures.

(ii) Expenditure on second-hand goods is not to be included, because such expenditure has already been included when they are originally purchased. However, any commission or brokerage on such goods is included as it is a payment made for productive service.

(iii) Expenditure on the purchase of financial assets such as shares and bonds is not to be included in total expenditure, as these are mere paper claims and are not related to the production of final goods and services.

(iv) Expenditure on transfer payments by the government is not to be included as such payments are not connected with any productive activity and there is no value addition.

(v) Imputed value/estimated value of expenditure on goods produced for self-consumption should
be taken into account, as these goods are reflected in the estimation of Gross Domestic Product (GDP).

Question 13.
(a) Some infrastructural facilities have a direct impact on production of goods and services while others give indirect support by building the social sector of the economy. In the light of above statement, state three difference between social and economic infrastructure.

(b) Compared to urban women more rural women are found working. Do you agree with the given statement? State any two reason in the light of above statement.
Answer:
(a)

Basics	Social Infrastructure	Economic Infrastructure
Meaning	Social infrastructure helps the economic system from outside, (i.e., indirectly)	Economic infrastructure helps the economic system from inside, (i.e., directly)
Purpose	Social infrastructure improves the quality of human resources.	Economic infrastructure improves the quality of economic resources.
Example	For example: health, education and housing.	For example: energy, transport and communication.

Basics Social Infrastructure Economic Infrastructure
Meaning Social infrastructure helps the economic system from outside, (i.e., indirectly) Economic infrastructure helps the economic system from inside, (i.e., directly)
Purpose Social infrastructure improves the quality of human resources. Economic infrastructure improves the quality of economic resources.
Example For example: health, education and housing. For example: energy, transport and communication.

(b) Yes, the difference in participation rates is very high between urban and rural women.
(i) In urban areas, for every 100 urban females, only about 14 are engaged in some economic activities. In rural areas, for every 100 rural women, about 26 participate in the employment market. It is because of poverty that women in rural areas are forced to seek employment.

(ii) On the other hand, women belonging to affluent families in urban areas generally do not work. In agriculture and allied activities, high skill and expertise are not required, hence women work to support their families. Also in the rural area, the size of the families is large, so the women work to feed their large families.

(iii) It is common to find 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 urban families do not want females to work.

(iv) Apart from this, many activities of the household in which urban women are engaged, are not recognised as productive work, while women working on farms in the rural areas are considered a part of the workforce if they are being paid wages in cash or in the form of food grains.