Students can access the CBSE Sample Papers for Class 12 Economics with Solutions and marking scheme Term 2 Set 8 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 12 Economics Standard Term 2 Set 8 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 Final Goods and Intermediate Goods. [2]
OR
Distinguish between positive externalities and negative externalities. [2]
Answer:
All those goods which have crossed the production line and are used for final consumption or investment are known as final goods such as refrigerator or JCB machine. Whereas, Intermediate Goods are all those goods which are used for the further production or act as inputs in the production of final goods, such as cotton for making cloth.
OR
Positive externalities refer to the unintended benefits provided by the activities of an entity to the people who do not pay for it. For example, the construction of road in rural areas helps the children to reach school early and save their time though children don’t pay for it. Whereas, negative externality refers to the unintended harms caused by the activities of an entity to the people who do not share its profits. For example, river pollution caused by industries doesn’t leave the water drinkable for all the areas downstream.
Question 2.
Calculate equilibrium level of income for a hypothetical economy, for which it is given that:
(a) Autonomous Investments = ₹500 crores, and [2]
(b) Consumption function, C = 100 + 0.80Y
OR
Calculate Change in Income (AY) for a hypothetical economy. Given that:
(a) Marginal Propensity to Consume (MPC) = 0.8, and
(b) Change in Investment (ΔI) = ₹1,000 crores [2]
Answer:
The Consumption function is, C = 100 + 0.8 Y
Autonomous investments = ₹500 crores
We know that at equilibrium level Y = C + I
So, Y = 100 + 0.8 Y + 500
Y – 0.8Y = 600
0.2 Y = 600
Y = ₹3,000 crores
Y = ₹3,000 crores
OR
Given ΔI = ₹1,000 crores
MPC = 0.8
Multiplier K = \(\frac{1}{1-\mathrm{MPC}}\)
Hence K = \(\frac{1}{1-0.8}\)
\(\frac{1}{0.2}\) = 5
We know K = \(\frac{\Delta \mathrm{Y}}{\Delta \mathrm{I}}\)
5 = \(\frac{\Delta Y}{1000}\)
Or ΔY = 1000 × 5
ΔY = ₹5,000 crores
Question 3.
‘As the income increases, people tend to save more’. Justify the given statement. [2]
Answer:
According to the psychological law of consumption, as the income of a consumer increases the average
propensity to consume falls and average propensity to save increases. Hence, when the income of the consumer is low, a bigger part of it is spent on consumption. But when the income start increasing, because most of their needs are already met, people start saving more.
Question 4.
State and discuss any two indicators that help in measuring the health status of a country. [2]
OR
Compare and analyze the ‘Women Worker Population Ratio’ in Rural and Urban areas based on the following information: [2]
Answer:
Following are the two indicators which help to measure the health status of a country are:
(a) Infant mortality rate: A child in the age group of 0-1 years is called an infant. The infant mortality rate is the number of deaths among infants per 1000 newly born babies. In other words it indicates that out of per 1000 live births, how many infants have not survived first year of their lives.
(b) Life expectancy at birth: Life expectancy at birth can be defined as the average number of years, a new bom is expected to live. A higher life expectancy indicates a better health status of a country.
OR
The data in the table shows:
(a) Participation of woman in workforce is more in rural areas in comparison to urban areas. One reason for this may be that the opportunities for unskilled work are more in rural areas than in urban areas. Higher poverty level in rural areas is one of the causes for women participation in rural areas.
(b) In rural areas female workers constitute approximately areas 34 percent of the male workers while in urban areas this ratio is approximately 27 percent.
Question 5.
‘Investment in infrastructure contributes to the economic development of a country.’ [2]
Justify the given statement with a valid argument.
Answer:
Infrastructure development refers to the development of facilities such as hospitals, educational
institutions, roads, electricity, mediums of communication and transportation etc. All these facilities
increase the productivity of the human resource of any country to a great extent. With productivity, rises the output, investment, employment, incomes and the quality of life of the people. Hence it can be said that infrastructure contributes to the economic development of a country.
Question 6.
Giving valid reasons explain which of the following will not be included in estimation of National Income of India? [3]
(a) Purchase of shares of X. Ltd. by an investor in the National Stock Exchange.
(b) Salaries paid by the French Embassy, New Delhi to the local workers of the housekeeping department.
(c) Compensation paid by the Government of India to the victims of flood.
OR
Estimate the value of Nominal Gross Domestic Product for a hypothetical economy, the value of Real Gross Domestic Product and Price Index are given as ?500 crores and 125 respectively. [3]
Answer:
Following items will not be included in estimation of National Income of India:
(a) The purchase of shares will not be included in the estimation of National Income as this is only the financial transaction and adds nothing in the production of goods or services.
(b) Compensation paid by the government to the flood victims will not be included in the estimation of National Income because this is just a transfer payment and adds nothing in the production of goods and services in the economy.
OR
Nominal Gross Domestic Product = Real Gross Domestic Product x \(\frac{\text { Price index }}{100}\)
= 500 × \(\frac{125}{100}\) = ₹625 crores
Question 7.
Study the following information and compare the Economies of India and Singapore on the grounds of ‘Investment in infrastructure as a percentage of GDP’ [3]
Sources : World Development Indicators 2019, World Bank website : www.worldbank.org: BP Statistical Review of World Energy 2019, 69th Edition.
Note : (*) refers to Gross Capital Formation.
Answer:
Investment in infrastructure as the percentage of GDP is the proportion of total output in a year which has been invested in the development of infrastructure in a country.
We can see from the table that the proportion of GDP which has been spent by India on the development of infrastructure is more, i.e. 30 percent in comparison to that of Singapore, i.e., 28 percent.
But if we see other indicators in the table we find that quality of life is far more better in Singapore. The main reasons of this difference are the vastness of geography and the size of population of India which are much higher than those of Singapore. If India has to achieve better quality of life, it will have to pay attention towards controlling the size of population and the quality of the infrastructure at affordable prices to people.
Read the following text carefully and answer question the number 8 and 9 given below:
SINO-PAK FRIENDSHIP CORRIDOR
The China-Pakistan Economic Corridor (CPEC) has deepened the decades-long strategic relationship between the two nations. But it has also sparked criticism for burdening Pakistan with mountains of debt . and allowing China to use its debt-trap diplomacy to gain access to strategic assets of Pakistan.
The foundations of CPEC, part of China’s Belt and Road Initiative, were laid in May 2013. At the time, Pakistan was reeling under weak economic growth. China committed to play an integral role in supporting Pakistan’s economy.
Pakistan and China have a strategic relationship that goes back decades. Pakistan turned to China at a time when it needed a rapid increase in external financing to meet critical investments in hard infrastructure, particularly power plants and highways. CPEC’s early harvest projects met this need, leading to a dramatic increase in Pakistan’s power generation capacity, bringing an end to supply-side constraints that had made rolling blackouts a regular occurrence across the country.
Pakistan leaned into CPEC, leveraging Chinese financing and technical assistance in an attempt to end power shortages that had paralyzed its country’s economy. Years later, China’s influence in Pakistan has increased at an unimaginable pace.
China As Pakistan’s Largest Bilateral Creditor: China’s ability to exert influence on Pakistan’s economy has grown substantially in recent years, mainly due to the fact that Beijing is now Islamabad’s largest creditor. According to documents released by Pakistan’s finance ministry, Pakistan’s total public and publicly guaranteed external debt stood at $44.35 billion in June 2013, just 9.3 percent of which was owed to China. By April 2021, this external debt had ballooned to $90.12 billion, with Pakistan owing 27.4 percent – $24.7 billion – of its total external debt to China, according to the International Monetary Fund (IMF).
Additionally, China provided financial and technical expertise to help Pakistan build its road infrastructure, expanding north-south connectivity to improve the efficiency of moving goods from Karachi all the way to Gilgit-Baltistan (POK). These investments were critical in better integrating the country’s ports, especially Karachi, with urban centers in Punjab and Khyber- Pakhtunkhwa provinces. Despite power asymmetries between China and Pakistan, the latter still has tremendous agency in determining its own policies, even if such policies come at the expense of the long- term socio-economic welfare of Pakistani citizens.
(https://www.suip.orQ/publications/2021/05/pakistans-QrowinQ-problem-its-china-economic-corridor – Modified)
Question 8.
Outline and discuss any two economic advantages of China Pakistan Economic Corridor (CPEC) accruing
to the economy of Pakistan. [3]
Answer:
Following are the two economic advantages of China Pakistan Economic Corridor (CPEC) accruing to the economy of Pakistan:
(a) China provided Pakistan the much needed credit which was required by the latter for the development of its road infrastructure facilitating north-south connectivity to improve the efficiency of moving goods from Karachi to Gilgit-Baltistan (POK).
(b) With the help of Chinese technical support, Pakistan could improve its power generation capacity, bringing an end to supply-side constraints that had made rolling blackouts a regular occurrence across the country.
Question 9.
Analyse the implication of bilateral ‘debt-trap’ situation of Pakistan vis-a-vis the Chinese Economy. [3] Answer:
China is notoriously famous to use its debt trap policy to pounce upon its neighbours and then usurping
their resources for its own nefarious purposes. China did the same with Pakistan. Through its credit support, China’s ability to exert influence on Pakistan’s economy has grown substantially in recent years, mainly due to the fact that Beijing is Islamabad’s largest creditor now. Pakistan’s total public and publicly guaranteed external debt was $44.35 billion in June 2013, just 9.3 percent of which was owed to China. By April 2021, this external debt had ballooned to $90.12 billion, with Pakistan owing 27.4 percent – $24.7 billion – of its total external debt to China. So the very implication of debt trap policy is that the interference capacity of China in Pakistan’s policy making has increased manifold.
Question 10.
Explain how ‘Non-Monetary Exchanges’ impact the use of Gross Domestic Product as an index of economic welfare. [3]
Sample Question Paper 325
Answer:
Non-monetary exchanges like the teaching by father to his children, cooking by a mother for her family etc. are not taken into consideration while estimating the National Income due to the inability in the correct assessment of the value of such exchanges because these services take place out of love and affection and not for some commercial purpose. Though the non-inclusion of such non-monetary exchanges result in under-estimation of National Income yet these are very important from the individual and social welfare point of view.
Question 11.
‘Monetary measures offer a valid solution to the problem of Inflationary gap in an economy’. State and
discuss any two monetary measures to justify the given statement. [5]
Answer:
Monetary measures are very effective measures to deal with the inflationary gap by controlling excess aggregate demand. Following are the two monetary measures to control the inflationary pressure:
(a) Open Market Operations: This refers to the purchase or sale of Government securities in the open market by the ‘Central Bank.’ When the Central Bank sells securities, the buyers of these securities pay to the Central Bank through cheques, thereby reducing the cash reserves of the commercial banks. This reduces the power of commercial banks to create credit thereby reducing inflationary pressure in the economy.
(b) Repo Rate: Repo rate is the rate of interest at which the Central Bank extends loan to the commercial banks. By raising repo rate, the loans to commercial banks can be made costly which increases the interest charged by commercial banks on their loans to general customers. This reduces the inflationary pressure created by excess credit demand in the economy.
Question 12.
(a) From the following data calculate the value of Domestic Income: [3]
| Items | Amount |
| (i) Compensation of Employees | (in ₹Crores) |
| (ii) Rent and Interest | 2,000 |
| (iii) Indirect Taxes | 800 |
| (iv) Corporate Tax | 120 |
| (‘r) Consumption of Fixed Capital | 460 |
| (vi) Subsidies | 100 |
| (vii) Dividend | 20 |
| (viii) Undistributed Profits | 940 |
| (ix) Net Factor Income from Abroad | 300 |
| (x) Mixed Income of Self Employed | 150 |
(b) Distinguish between VaIue of Output’ and ‘Value Added’. [2]
OR
(a) Given the following data, find Net Value Added at Factor Cost by Sambhav (a farmer) producing Wheat: [3]
| Items | (in crore) |
| (i) Sale of wheat by the farmer in the local market | 6800 |
| (ii) Purchase of Tractor | 5000 |
| (iii) Procurement of wheat by the Government from the farmer | 200 |
| (iv) Consumption of wheat by the farming family during the year | 50 |
| (v) Expenditure on the maintenance of existing capital stock | 100 |
| (vi) Subsidy | 20 |
(b) State any two components of ‘Net Factor Income from Abroad’. [2]
Answer:
(a) Domestic Income (NDPFC) = Compensation of Employees + Rent and Interest + Corporate Tax + Dividend + Undistributed Profits + Mixed Income of Self Employed
= ₹2000 + ₹800 + ₹60 + ₹940 + ₹300 + ₹200
= ₹4,700 crore
(b) Value of output refers to the market value of goods and services produced by a firm. Value of output is calculated by adding closing stock and output for self-consumption in the value of sales and deducting opening stock from the calculated value (Sales + Closing stock + Output for self¬consumption – Closing stock). Whereas, Value Added is the excess of value of output over the intermediate consumption i.e., (value of output – intermediate consumption).
OR
Net Value Added at Factor Cost (NVAFC) =
(i) Sale of wheat by the farmer in the local market
+ (iii) Procurement of wheat by the Government from the farmer
+ (iv) Consumption of wheat by the farming family during the Year
+ (v) Subsidies
– (vi) Expenditure on the maintenance of existing capital stock
= ₹6800 + ₹200 + ₹50 + ₹20 – ₹100
= ₹6,970 crore
(b) Following are the two components of the Net Factor Income from Abroad:
(i) Net compensation of employees: It is the difference between compensation received by residents and compensation given to non residents working within the domestic territory of the country.
(ii) Net income from property and entrepreneurship: It is equal to the difference between the undistributed profit received from abroad by residents companies and undistributed profits paid to non-residents companies abroad.
Question 13.
(a) ‘Pesticides are chemical compounds designed to kill pests. Many pesticides can also pose health risks to people even if exposed to nominal quantities.’ [2]
In the light of the above statement, suggest any two traditional methods for replacement of the chemical pesticides.
(b) ‘In recent times the Indian Economy has experienced the problem of Casualisation of the workforce. This problem has only been aggravated by the outbreak of COVID-19.’ [3]
Do you agree with the given statement? Discuss any two disadvantages of casualisation of the workforce in the light of the above statement.
Answer:
Following are the two traditional methods to control pests without using the chemical fertilisers:
(i) Bio-Pesticides: Many natural ingredients have the property to control pest. Neem is the most common bio-pesticide used by the farmers to kill the pests. Neem water can be sprayed on the crops to save them from the pests.
(ii) Crop Rotation: Crop rotation is also an effective way to control pests. Crop rotation refers to the sowing of different crops alternatively. This does not allow pests to grow.
Agree. In recent years the casualisation of work force in India is on the rise. It is happening due to increase of concentration of wealth in the hands of very few people and government’s indifferent attitude towards creating employment opportunities in organised sector. The Covid-19 has intensified this casualisation.
Following are the two disadvantages of casualisation of the workforce:
(a) The rights of casual workers are not at par with those of regular workers under the labour laws
of India. Hence casual workers are not covered by any job security or compensation in the times of crisis.
(b) Covid-19 resulted into the untimely deaths of many casual workers. Due to their low incomes, these workers were generally not covered by any life insurances policy. The untimely deaths of the casual workers left their families in the uncertain future.