CBSE Class 12 Previous Year Question Papers With Solutions Pdf Economics

Class 12 Subject Economics Paper Set 2 with Solutions

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Question 1: (Marks 1)

If the entire additional income of an economy is consumed, the value of investment multiplier will be _________ . (Choose the correct alternative)

(A) zero (0)

(B) not defined (∞)

(C) one (1)

(D) ten (10)

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Answer :

(B) not defined (∞)

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Question 2: (Marks 1)

A car purchased by a household is a _________ . (Choose the correct alternative)

(A) single use capital good

(B) single use consumer good

(C) durable consumer good

(D) semi-durable consumer good

OR

GNP deflator is represented by which of the following formula ? (Choose the correct alternative)

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Answer :

(C) durable consumer good

OR

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Question 3: (Marks 1)

Name the two components of Aggregate Demand in a closed economy.

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Answer :

Consumption Expenditure (C) and Investment Expenditure (I)

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Question 4: (Marks 1)

_________ is the agent and adviser to the Government of India. (Fill in the blank with correct answer)

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Answer :

Reserve Bank of India (RBI)

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Question 5: (Marks 1)

State whether the following statement is true or false :

‘‘To reduce inflation, the Central Bank should reduce Cash Reserve Ratio (CRR).’’

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Answer :

False

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Question 6: (Marks 1)

Government expenditure incurred on defence items is a type of _________ expenditure in the Government Budget. (Fill in the blank with correct answer)

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Answer :

capital/revenue

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Question 7: (Marks 1)

State whether the following statement is true or false :

‘‘Under a managed floating exchange rate system, the Government directly controls the exchange rate.’’

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Answer :

False

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Question 8: (Marks 1)

‘Charity from Abroad’ will be recorded on _________ (credit/debit) side of the Balance of Payment accounts. (Fill in the blank with correct answer)

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Answer :

credit

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Question 9: (Marks 1)

Give any two examples of non-tax revenue receipts.

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Answer :

Fees, penalties

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Question 10: (Marks 1)

Suppose in a hypothetical economy, the income rises from ₹ 500 crores to ₹ 600 crores. As a result, the consumption expenditure rises from ₹ 400 crores to ₹ 500 crores. Marginal propensity to consume in such a case would be _________ . (Choose the correct alternative)

(A) 0·8

(B) 0·4

(C) 1·0

(D) 0·6

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Answer :

(C)1.0

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Question 11: (Marks 3)

‘‘Gross Domestic Product (GDP) is not the best indicator of the economic welfare of a country.’’ Defend or refute the given statement with valid reasons.

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Answer :

The given statement can be defended on the following grounds, as GDP may not take into account:

(i) Non monetary exchanges like services of housewives.

(ii) Externalities (benefits/harms) caused by human activities.

(iii) Distribution of Income (GDP).

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Question 12: (Marks 3)

Discuss the working of the adjustment mechanism if, Aggregate Demand (AD) is greater than Aggregate Supply (AS).

OR

If in an economy :

Change in initial investment (ΔI) = ₹ 1,000 crores,

Marginal propensity to save (MPS) = 0·2.

Find the value of the following :

(a) Investment multiplier (K)

(b) Change in final income (ΔY)

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Answer :

When Aggregate Demand is greater than Aggregate Supply (AD>AS), buyers are planning to, buy more goods and services than what producers are planning to produce. It will lead to fall in planned inventories below the desired level. The producers in turn will produce more, which will raise the income level i.e. AS, till AD becomes equal to AS

OR

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Question 13: (Marks 4)

What role does credit multiplier play in determining the credit creation capacity of the banking system ? Use a numerical illustration to explain.

OR

Elaborate any two instruments of credit control, exercised by the Reserve Bank of India.

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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 by commercial banks depends on credit multiplier as it is inversely related to LRR. Higher the value of credit multiplier, higher will be the total credit created and vice - versa.

For Example: suppose LRR is 0.5 and initial deposit is Rs. 1,000

Thus, with the same initial deposit total credit creation increases with an increase in the value of credit multiplier.

OR

Two instruments of credit control are

► Repo rate – It is the rate of interest at which central bank lends to commercial banks for their short term requirements. An increase in repo rate will force commercial banks to increase their lending rates. It will make borrowings costlier to general public.

► Open market operations- It refers to buying and selling of government securities by the central bank from and to the general public. When central bank sells its securities, it reduces liquidity (deposits) with commercial banks and adversely affects credit creating power of banks.

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Question 14: (Marks 4)

‘US dollar has recorded a jump of 0·75 paise per dollar (p/$) in the last one month; this situation might bring smiles and sorrows to different types of traders (exporters and importers).’’ Justify the given statement.

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Answer :

The given condition indicates to the situation of depreciation of home currency (₹) vis-a-vis foreign currency (US $). This implies that more units of Indian currency (₹) is to be paid to buy one unit of foreign currency (US $).

This may lead to sorrows for importers, as they have to pay higher amount for their imports.

Also, this may bring smiles for exporters, as they would be getting higher earnings for their exports.

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Question 15: (Marks 4)

‘‘The Government Budget of a country cannot have fiscal deficit without the existence of revenue deficit.’’ Defend or refute the given statement.

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Answer :

The given statement can be refuted as the fiscal deficit can exist without revenue deficit, if:

i) Capital Budget is in deficit (CE > CR) with balanced Revenue Budget (RE = RR).

ii) Capital Budget is in deficit (CE > CR) in greater proportion to Surplus Revenue Budget (RE)

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Question 16: (Marks 6)

(a) ‘‘Circular flow of income in a two-sector economy is based on the axiom that one’s expenditure is other’s income.’’ Support your answer with valid reasons.

(b) Distinguish between ‘value of output’ and ‘value added’.

OR

Using the following data of an imaginary economy, calculate and compare the Real Gross Domestic Product (GDP) for the given years :

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Answer :

(a) 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.

(b) Value of output is the estimated money value of all the goods and services, inclusive of change in stock and production for self consumption. Whereas;

Value added is the excess of value of output over the value of intermediate consumption.

OR

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Question 17: (Marks 6)

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Answer :

KT’ represents inflationary gap

Two fiscal measures to correct the situation of inflationary gap are –

a) Increase in Taxes - To curb the inflationary gap the government may increase the taxes. This may reduce the purchasing power in the hands of the public which in turn may reduce the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.

b) Reduction in Government Expenditure- To curb the inflationary gap the government may reduce its non developmental expenditure. This may reduce the purchasing power in the hands of the people which in turn will reduce the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.

For visually Impaired Candidates:

Deflationary gap is that situation when Aggregate Demand is lesser than Aggregate Supply corresponding to full employment level.

Two fiscal measures are to control it are:

a) Decrease in Taxes - To curb the deflationary gap the government may decrease the taxes. This may increase the purchasing power in the hands of the people which in turn may increase the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.

b) Increase in Government Expenditure- To curb the deflationary gap the government may increase its expenditure. This may increase the purchasing power in the hands of the people which in turn may increase the Aggregate Demand in the economy to bring it equal to the Aggregate Supply.

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Question 18: (Marks 1)

In the year _________, the Indian Government made education free and compulsory for all children between 6 – 14 years. (Choose the correct alternative)

(A) 2001

(B) 2009

(C) 2003

(D) 2007

OR

Which one of the following organisations regulates the health sector in India ? (Choose the correct alternative)

(A) ICMR

(B) UGC

(C) AICTE

(D) RBI

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Answer :

(B) 2009

OR

(A) ICMR

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Question 19: (Marks 1)

State whether the following statement is true or false :

‘‘Land ceiling means fixing the minimum limit of land holding for an individual.’’

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Answer :

False

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Question 20: (Marks 1)

Identify and match the correct sequence of alternatives of organisations given in Column I with their respective functions in Column II :

Choose the correct alternative from the following :

(A) a-(ii), b-(i), c-(iii), d-(iv)

(B) a-(ii), b-(iv), c-(iii), d-(i)

(C) a-(ii), b-(iii), c-(iv), d-(i)

(D) a-(ii), b-(iv), c-(i), d-(iii)

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Answer :

(D) a-(ii),b-(iv),c-(i),d-(iii)

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Question 21: (Marks 1)

Mao initiated the ‘Great Leap Forward’ in the year ___________ . (Choose the correct alternative)

(A) 1951

(B) 1955

(C) 1958

(D) 1962

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Answer :

(C) 1958

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Question 22: (Marks 1)

Name the apex institution for rural financing in India.

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Answer :

NABARD

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Question 23: (Marks 1)

___________ policy was implemented in the first seven five-year plans of India, to protect domestic industries. (Fill in the blank with the correct answer)

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Answer :

Import substitution /inward looking trade.

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Question 24: (Marks 1)

__________ is an example of a commercial source of energy. (Choose the correct alternative)

(A) Firewood

(B) Coal

(C) Agricultural waste

(D) Dried dung cakes

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Answer :

( B) Coal

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Question 25: (Marks 1)

State whether the following statement is true or false :

‘‘Proportion of people living below poverty line is more in India as compared to Pakistan.’’

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Answer :

True

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Question 26: (Marks 1)

Name any one Maharatna company.

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Answer :

Indian Oil Corporation Limited or Steel Authority of India Ltd. (or Any other relevant example)

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Question 27: (Marks 1)

Which of the following is not an advantage of organic farming ? (Choose the correct alternative)

(A) Cheap inputs

(B) Attractive returns on investment

(C) Greater possibilities for import

(D) High nutritional value

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Answer :

(C) Greater possibilities for import

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Question 28: (Marks 3)

‘‘Power sector in India has major challenges to face.’’ Discuss the given statement with valid reasons.

OR

‘‘India has failed to implement the recommendations of Education Commission of 1964 – 66.’’ Give valid arguments in support of the given statement.

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Answer :

Major challenges faced by power sector in India are, as follows:

(I) India’s installed capacity to generate electricity is not sufficient. Even the installed capacity is underutilized because power plants are not running properly.

(ii) State Electricity Board which distribute electricity are incurring losses due to obsolete transmission and distribution system and wrong pricing.

(iii) Thermal power plants are facing shortage of raw material and coal supplies.

OR

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.

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Question 29: (Marks 3)

‘‘Recently the Government of India has decided to merge MTNL and BSNL on account of rising losses.’’ Justify the steps taken by the Government of India.

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Answer :

The decision taken by the Government of India to merge BSNL and MTNL is quite appropriate. The Government has merged the two loss incurring businesses, with a motive to:

i) achieve higher economic and functional efficiency.

ii) minimise possible losses (any other relevant reason to be allotted marks)

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Question 30: (Marks 4)

Discuss briefly, how institutional reforms (land reforms) have played a significant role in transforming Indian agriculture.

OR

‘‘Import restrictions were imposed in India with the dual objective to save foreign exchange reserves and to be self-sufficient.’’ Justify the given statement with valid arguments.

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Answer :

After independence the government of India took several institutional/land reforms to ensure transformation of Indian agriculture, such as:

i) Land ceiling – It ensured reduction of concentration of land ownership in few hands.

ii) Abolition of Zamindari system – It focused on elimination of farmers’ exploitation and promotion of agricultural growth.

These reforms have led to stability of farming as an occupation and promoted equity.

OR

The given statement is appropriate as the policy aimed at:

i) Protecting the domestic industries from foreign competition by substituting imports with domestic production.

ii) Saving scarce foreign exchange by restricting the volume of imports.

Thus, in the early post-independence era the dual objectives helped India to move towards the goal of self-reliance.

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Question 31: (Marks 4)

Comment upon any two salient features of occupational structure of India on the eve of Independence.

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Answer :

The occupational structure of India on the eve of independence had the following two main features:

i) Predominance of agriculture sector : The agricultural sector accounted for the largest share of workforce with approximately three-forth of the workforce depending on agriculture, directly or indirectly.

ii)Growing regional variation- Due to rise of manufacturing and services sector in some parts of India (like the then Madras, Bombay and Bengal Presidencies) the dependency ratio of workforce on agricultural sector declined.

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Question 32: (Marks 4)

Compare and analyse the given data of India and China with valid reasons :

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Answer :

a) The given data shows that China could arrest its annual population growth rate with the implementation of some stringent measure in late 1970’s like the introduction of one child norm. This step has been instrumental in controlling the growth of population in China. India stands virtually more than double to China at its annual population growth rate of 1.2% as compared to China’s annual population growth rate of 0.5% pa.

b) The social dynamics of both the countries are similar to each other; sex ratio is low and biased in both the countries due to preference for male child. Whereas, India stands at 929 females per 1000 males, China is not far ahead at 941 females per 1000 males.

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Question 33: (Marks 6)

Define the following :

(a) Carrying capacity of environment

(b) Bio-composting

(c) Sustainable Development

(d) Absorptive capacity of the environment

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Answer :

(a) Carrying capacity of environment – It implies that the resources extraction is not above the rate of regeneration of the resources and wastes generated are within the assimilating capacity of the environment.

(b) Bio composting - It refers to the process of converting organic waste of various types into natural manure.

(c) Sustainable development - It refers to the development process that meets the needs of present generation without compromising on the ability of the future generations to meet their respective needs.

(d) Absorptive capacity of the environment- It means the ability of the environment to absorb degradation without causing environmental damage.

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Question 34: (Marks 6)

(a) Comment upon the informalisation of labour force in India.

(b) Define the worker-population ratio.

OR

Critically examine the results of Poverty Alleviation Programmes implemented in India since independence.

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Answer :

(a) In the recent years India has witnessed an unprecedented growth of informal sector or unorganised sector. In India almost the entire agricultural sector and a very large number of industrial and service sector units fall in informal sector. Those employed under this sector, generally, are not entitled to get regular salary and other social security benefits.

Thus, Informalisation of labour force refers to a situation where by the proportion of workforce in the informal sector to total workforce increases. Keeping in view the growth of this sector and disadvantages attached to it, the Indian government, in recent times, has initiated the modernisation of this sector and provision of social security measures to the workers in this sector.

(b) Worker Population Ratio refers to the ratio of total number of workers to the total population. It is generally expressed in percentage.

OR

Poverty Alleviation Programmes are the designated programmes to target reduction in/removal of poverty in a country. India, which inherited poverty from British rule, tried her level best to eradicate poverty through various Poverty Alleviation Programmes over the years. As a result, the percentage of absolute poor in some states has fallen well below the national average of poverty. However, the problems of malnourishment, hunger and illiteracy continue to be a common feature in many parts of India, because of the following reasons:

► There has been no radical change in the ownership of assets.

► Due to unequal distribution of land and other assets, benefits from such programmes have been appropriated by the non-poor.

► Inadequate resource allocation for these programmes.

► The Government officials responsible for implementing these programmes were ill motivated and inadequately trained.

To conclude we may say that poverty alleviation programmes were a great step but could not achieve desired results due to improper implementation.

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